STOCHASTIC SIMULATION AND APPLICATIONS IN FINANCE WITH MATLAB PROGRAMS

Stochastic Simulation and Applications in Finance with MATLABPrograms explains the fundamentals of Monte Carlo simulationtechniques, their use in the numerical resolution of stochasticdifferential equations and their current applications in finance.Building on an integrated approach, it provides a pedagogicaltreatment of the need-to-know materials in risk management andfinancial engineering. The book takes readers through the basic concepts, covering themost recent research and problems in the area, including: thequadratic re-sampling technique, the Least Squared Method, thedynamic programming and Stratified State Aggregation technique toprice American options, the extreme value simulation technique toprice exotic options and the retrieval of volatility method toestimate Greeks. The authors also present modern termstructure of interest rate models and pricing swaptions with theBGM market model, and give a full explanation of corporatesecurities valuation and credit risk based on the structuralapproach of Merton. Case studies on financial guarantees illustratehow to implement the simulation techniques in pricing andhedging.