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Published byEverett Rodger Bell Modified over 6 years ago
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1 Seminar 3 Finite differences vs Monte Carlo methods
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Introductory discussion
2 Talk in your new groups about your experiences from implementation and experiments with Monte Carlo and finite differences. Pay extra attention to: Implementation aspects (which one was easiest/most difficult to program) Efficiency aspects (which one seems to be most efficient with respect to computational time/accuracy) Which one do you like the most and why! Start looking at each others implementations. Discuss which ones to use. Do you need to change something in the codes to make the comparisons fair?
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The greeks The greeks give the sensitivity of V (the value of the option) with respect to changes in the price of the underlying asset and model parameters. Important parameters!
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High-dimensional problems
Monte-Carlo methods Finite differences
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Discussion in groups 5 Read about the greeks (Seydel 3.6.4, notes and comments on section 4.7, A4, The solution and the greeks, Björk, chapter 9) and discuss them. Why are they interesting and how suitable are the different methods to compute the greeks. Discuss the extension to high-dimensional problems (Seydel 3.5.5, 6.2), i.e. when the option depends on several underlying assets.
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