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Table Of Contents

Introduction
1.1. RANDOM VARIABLES AND CONDITIONAL EXPECTATION 3
1.1 Random Variables and Conditional Expecta-
1.2. STOCHASTIC PROCESSES AND STOPPING TIMES 5
1.2 Stochastic Processes and Stopping Times
1.3 Trading, Options, Interest rates
1.4 Low Discrepancy Sequences and Lattice Mod-
2.1 Monte Carlo expectation
2.2 Monte Carlo Variance
2.3 Implementation
2.4 Empirical Distribution
2.5 Random Vectors and Covariance
2.6 Monte Carlo estimation of the covariance
2.7 C++ implementation
2.8 Control Variates
2.8.1 C++ Implementation
Stochastic Processes and
3.1 Processes and Information
3.2 Path functionals
3.2.1 C++ Implementation
3.3 Stopping times
3.4 Random Walks
3.5 Markov Chains
3.6 Optimal Stopping
3.7 Compound Poisson Process
3.11 Asset price processes
4.1 Single Asset Markets
4.2 Basic Black-Scholes Asset
4.3 Markov Chain Approximation
4.4 Pricing European Options
4.5 European Calls
4.6 American Options
4.6.1 Price and optimal exercise in discrete time
4.6.2 Duality, upper and lower bounds
4.6.3 Constructing exercise strategies
4.6.4 Recursive exercise policy optimization
Trading And Hedging
5.1 The Gains From Trading
5.2 Hedging European Options
5.2.1 Delta hedging and analytic deltas
5.2.2 Minimum Variance Deltas
5.2.3 Monte Carlo Deltas
5.2.4 Quotient Deltas
5.3 Analytic approximations
5.3.1 Analytic minimum variance deltas
5.3.2 Analytic quotient deltas
5.3.3 Formulas for European calls
5.4 Hedge Implementation
5.5 Hedging the Call
5.5.1 Mean and standard deviation of hedging the call
5.5.2 Call hedge statistics as a function of the strike price
5.6.1 Discretization of the time step
5.6.2 Trading and Hedging
The Libor Market Model
6.1 Forward Libors
6.2 Arbitrage free zero coupon bonds
6.3 Dynamics of the forward Libor process
6.5 Choice of the factor loadings
6.6 Discretization of the Libor dynamics
6.6.1 Predictor-Corrector algorithm
6.7 Caplet prices
6.8 Swap rates and swaption prices
6.9 Libor simulation without drift term
6.9.1 Factor loadings of the Libors
6.9.2 Caplet prices
6.9.3 Swaption prices
6.9.4 Bond options
6.10 Implementation
6.11 Zero coupon bonds
6.12 Model Calibration
6.12.1 Volatility surface
6.12.2 Correlations
6.13 Monte Carlo in the Libor market model
6.14 Control variates
6.14.1 Control variates for general Libor derivatives
6.14.2 Control variates for special Libor derivatives
6.15 Bermudan swaptions
7.1 Expectations with low discrepancy sequences
-discrepancies in dimension 10
Lattice methods
8.1 Lattices for a single variable
8.1.1 Lattice for two variables
8.1.2 Lattice for n variables
Utility Maximization
9.1 Introduction
9.1.1 Utility of Money
9.1.2 Utility and Trading
9.2 Maximization of Terminal Utility
Matrices
A.1 Matrix pseudo square roots
A.2 Matrix exponentials
B.1 Simulation
B.2 Conditioning
B.3 Factor analysis
B.3.1 Integration with respect to PY
C.1 Numeraire measure
C.2 Change of numeraire
C.3 Exponential integrals
C.4 Option to exchange assests
C.5 Ito’s formula
Optional Sampling Theorem
D.1 Optional Sampling Theorem
E.1 Templates
E.2 The C++ classes
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MCBook-1.2

MCBook-1.2

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Published by: blork98 on Apr 03, 2011
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