This course provides a survey of term structure models. Models are examined as spot rate models, as HJM models, and as futures-based models. This course initially presents standard topics in simulation including random variable generation, variance reduction methods and statistical analysis of simulation output. The course then reviews papers from the current finance literature to illustrate the application of these methods to derivative security pricing. The topics addressed include importance sampling, martingale control variables, stratification and the estimation of derivatives.
Applications change from year to year to reflect current events.
The optimization course is a project based course in which you learn how to apply optimization techniques to solve financial problems. The course will cover optimization techniques for both linear and non-linear problems with several examples of financial applications. The first project is a bond portfolio construction project, the second an option replication project with transaction costs. Each project will require a presentation of the analysis. This course discusses issues of model selection, estimation and calibration.