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New York Institute of Finance

Advanced Tools for Derivatives Valuation

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Next dates

Sep 18—19
2 days
New York, New York, United States
USD 2425
USD 1212 per day

Categories

Investment

Description

Learn how to use a variety of numerical techniques to price American options and exotic derivatives.

This course is a component of the Advanced Derivatives Professional Certificate.

Prerequisite knowledge:

  • Familiarity with derivative instruments
  • Basic knowledge of stochastic calculus, e.g. Ito's lemma
  • Intermediate to advanced MS Excel skills
  • Intermediate probability and statistics
  • Basic calculus, including partial differentiation and integration

CURRICULUM

Day 1

MODULE 1: EXOTIC OPTIONS AND PATH DEPENDENCY

  • Strong vs. weak path dependency
  • Asian Options
  • Barrier Options
  • Exchange options
  • Lookback options

MODULE 2: OVERVIEW OF NUMERICAL METHODS

  • Valuation techniques for path dependent options
  • Monte Carlo basics
  • Finite difference methods
  • Numerical Integration

MODULE 3: MONTE CARLO METHODS FOR DERIVATIVES VALUATION

  • Monte Carlo methods applied to discrete models
  • Monte Carlo methods applied to continuous models
  • Getting to the Greeks
  • Techniques for accelerating convergence
  • Pros and Cons of Monte Carlo techniques

Day 2

MODULE 1: FINITE DIFFERENCE METHODS: ONE FACTOR MODELS

  • The fundamental PDE and boundary conditions
  • Explicit finite difference methods
  • Implicit finite difference methods
  • Crank-Nicolson method

MODULE 2: FINITE DIFFERENCE METHODS: TWO FACTOR MODELS

  • Explicit finite difference methods
  • Alternating direction implicit method
  • Hopscotch method

WHAT YOU'LL LEARN

  • Price American- and exotic options by Monte Carlo simulation
  • Understand and apply variance reduction techniques to Monte Carlo simulations
  • Understand the pros and cons of various finite difference techniques, including explicit, implicit and Crank-Nicolson, for derivatives valuation
  • Learn how to use a Crank-Nicolson pricer for pricing options which have no closed form solutions.

Who should attend

  • Traders
  • desk quants
  • risk analysts and financial engineers
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