Code for related simulations and models are available with the lecture notes, some of which may be useful on the Problem Sets.
| LEC # | TOPICS | LECTURE NOTES |
|---|---|---|
| 1 | Arbitrage-free pricing models | (PDF - 1.1MB) |
| 2 |
Stochastic calculus and option pricing Code: Quadratic variation simulation |
(PDF) (M) |
| 3 |
Simulation methods Code: Black-Scholes model Monte Carlo illustration Code: Black-Scholes with a jump Monte Carlo (PS1, Q2) Code: Monte Carlo with control variates, stochastic volatility model |
(PDF) (M) (M) (M) |
| 4 | Dynamic portfolio choice I: Static approach to dynamic portfolio choice | (PDF) |
| 5 | Dynamic portfolio choice II: Dynamic programming | (PDF) |
| 6 |
Dynamic portfolio choice III: Numerical approximations in dynamic programming Code: Numerical DP solution |
(PDF) (M) |
| 7 | Parameter estimation | (PDF) |
| 8 | Standard errors and tests | (PDF) |
| 9 | Small-sample inference and bootstrap | (PDF) |
| 10 | Volatility models | (PDF) |
| 11 | Review: Arbitrage-free pricing and stochastic calculus | (PDF) |
| 12 | Review: DP and econometrics | (PDF) |
The following handouts and slides were used to supplement lecture materials.
Crossing probabilities of the Brownian motion (PDF)
Key points: Derivatives and Monte Carlo (PDF)
Dynamic programming: Justification of the principle of optimality (PDF)
Examples of dynamic programming problems (PDF)
