RMSC4001 - Simulation Methods for Risk Management and Finance

This course starts with presenting standard topics in simulation including random variable generations, variance reduction methods and statistical analysis of simulation outputs. The course then reviews the applications of these methods to derivative security pricing. Topics addressed include importance sampling, martingale control variables, stratification and the estimation of derivatives. Additional topics include the use of low discrepancy sequence (quasi-random numbers), pricing American options and scenario simulation for risk management.

Instructor: Prof. WONG, Hoi Ying

Textbook

  • Chan, N.H. and Wong, H.Y. (2015). Simulation Techniques in Financial Risk Management, 2nd Ed., Wiley.

Recommended Books / Reading

  • Hull, J. Options, futures, and other derivative securities. Vol. 7. Englewood Cliffs, NJ: prentice hall, 1993.
  • Ross, S.M. (2002), Simulation, 3rd Edition, Academic Press.
  • Chan, N.H. and Wong, H.Y. (2013). Handbook of Financial Risk Management: Simulations and Case Studies, Wiley, New York.