AMAT 483

This is the home page for the Winter 2011 version of AMAT 483: Introduction to Computational Finance. There are links on this page to help you explore the subject for yourself. Important announcements will appear below, and the calendar will help you navigate through the semester. On the right hand side of this page you'll see some information about how to contact me, as well as some essential links for easy access.

This course is devoted to the study of computational methods for pricing financial derivatives. These contracts have enjoyed enormous success since options were first traded on the Chicago Board Options Exhange in 1973. They range from simple European put and call options to much more exotic contracts with equally exotic names. But in each case they are contracts with some value that changes over the life of the contract and which varies according to the fluctuations of some underlying asset price(s). We'll begin by studying the behaviour of the underlying market prices, seeing how binomial trees can lead to continuous-time models based on Brownian motion. We will study ways of simulating prices computationally, look at how option prices can be given as solutions to partial differential equations, study the Black-Scholes formula, and study several computational methods for pricing and hedging more exotic kinds of options.

The course is designed to provide a working familiarity with some of the computational techniques commonly used in mathematical finance. The computations wi ll be carried out in MATLAB, a high-level computing language that means that the emphasis can be put on understanding how the algorithms themselves work. Working codes will be provided at every stage, so that no previous programming experience is required.

• [2011-04-04] Here is Assignment 4.
• [2011-03-31] Solutions to the midterm are now available.
• [2011-03-14] Here is Assignment 3. And the codes that we developed in the last couple of tutorials are also available from the calendar below.
• [2011-03-07] Last year's midterm is available.
• [2011-02-16] The second assignment is available.
• [2011-02-10] I have posted the note on discrete hedging. The Wilmott paper can be found here.
• [2011-02-04] The Week 4 code has been fixed.
• [2011-01-27] The first assignment is due Friday 11th February. It consists of the following questions from the text: 2.4, 3.2, 3.4, 4.2, 6.6 and the programming assignments 4.1 and 4.2. Your solution to the programming assignment should be given to me in electronic form.
• [2011-01-27] My Office Hours: Monday 1-2 and Thursday 12-1.
• [2011-01-27] The first three sets of annotated slides are available: 1, 2, 3.
• [2011-01-14] The class times have changed. Lectures are now MW 12:00-12:50 and R 11:00-11:50 (all in MS 522), and the tutorial is now R 15:00-15:50 in MS 521.

All references to future events should be taken as provisional.

The links "pN" and "sN" refer to `plain' and `spread' versions of the week's lecture notes, respectively.

• Lectures take place in MS 522 MW 12:00-12:50 and R 11:00-11:50. There is a tutorial scheduled for 3pm Thursdays in MS571.
• The course text is Financial Option Valuation by Des Higham. There's also an author site with some more helpful information.
• I will hold office hours in MS 586: times TBA.

• Course outline
• Syllabus
• Department course listing