Monte Carlo Simulation with Applications to Finance / Edition 1

by Hui Wang

Overview

Developed from the author’s course on Monte Carlo simulation at Brown University, Monte Carlo Simulation with Applications to Finance provides a self-contained introduction to Monte Carlo methods in financial engineering. It is suitable for advanced undergraduate and graduate students taking a one-semester course or for practitioners in the financial industry.

The author first presents the necessary mathematical tools for simulation, arbitrary free option pricing, and the basic implementation of Monte Carlo schemes. He then describes variance reduction techniques, including control variates, stratification, conditioning, importance sampling, and cross-entropy. The text concludes with stochastic calculus and the simulation of diffusion processes.

Only requiring some familiarity with probability and statistics, the book keeps much of the mathematics at an informal level and avoids technical measure-theoretic jargon to provide a practical understanding of the basics. It includes a large number of examples as well as MATLAB^® coding exercises that are designed in a progressive manner so that no prior experience with MATLAB is needed.

Product Details

ISBN-13:	9781439858240
Publisher:	Taylor & Francis
Publication date:	05/22/2012
Series:	Chapman and Hall/CRC Financial Mathematics Series , #24
Edition description:	New Edition
Pages:	292
Product dimensions:	6.30(w) x 9.30(h) x 1.00(d)

About the Author

Hui Wang is an associate professor in the Division of Applied Mathematics at Brown University. He earned a Ph.D. in statistics from Columbia University. His research and teaching cover Monte Carlo simulation, mathematical finance, probability and statistics, and stochastic optimization.

Table of Contents

Review of Probability. Brownian Motion. Arbitrage Free Pricing. Monte Carlo Simulation. Generating Random Variables. Variance Reduction Techniques. Importance Sampling. Stochastic Calculus. Simulation of Diffusions. Sensitivity Analysis. Appendices. Bibliography. Index.

Editorial Reviews

"I liked this book because it gave me a good review of the mathematics of option pricing. The chapters are well written and were clear to me."
—INFORMS Journal on Computing, 25(1), 2013

"… is suitable for the practitioner in search of a hands-on approach to the topic, as well as the student/researcher who wants to have a quick way to know what'simulation techniques (in particular for pricing derivatives) are about."
—Gunther Leobacher, Mathematical Reviews Clippings December 2013

From the Publisher