CS 522 Computational Methods for Finance
Computer Science Department
Cornell University
Spring 2001
Computational finance is a new discipline at the
intersection of probability theory, finance and numerical
analysis. The emphasis of this course is on
numerical computing for some important financial problems such
as derivative pricing and risk management.
Standard as well as exotic derivatives on equities,
indices, futures, and fixed income securities will be introduced;
different computational methods are used for their pricing and hedging.
In addition, we will examine the role of numerical
computing in risk management and portfolio optimization.
You can also download the course information sheet (Postscript, PDF format)
Announcements
- Room: OH216
- Time: Lecture TR 11:40 - 12:55pm,
- Midterm:March 6, 11:40am-12:55pm during lecture time.
Location: Upson 211
- : Thursday, May 17, 9:00am-11:30am in Bard 140. The exam will be closed book/notes and similar to the midterm
format. The material in Chapters 16 & 18 are not covered in lecture and will
NOT be on the exam. Note that solutions to assignment 4 will be posted
on Monday after all assignments are turned in.
Note: There is a late assignment penalty of 25% off for
each late day.
There will be four or five assignments, a midterm, and a final exam.
Course Staff
Instructor:: Yuying Li ( yuying@cs.cornell.edu).
635 Rhodes Hall, Cornell University, Ithaca, New York.
Office Hours: Mondays from 2:30 to 3:30pm, in 635 Rhodes Hall .
Teaching Assistant: Siddharth Alexander ( alexande@cam.cornell.edu ).
Office hours: Thursdays from 2:30 to 3:30pm, in 657 Rhodes Hall.
Course Materials
- Homework 1 (Postscript,
PDF format).
- Correction: For Q2, P(E,T) denotes the time t price of a put
option, not a call option. Hint: approximate the partial derivatives by finite
difference
- For Q3(c), you may use the matlab command hist
- Homework 1 Solutions (Postscript,
PDF format).
- Homework 2 (Postscript,
PDF format).
- M-files that you need for HW-2 (
LBidiSol.m, TriDiLU.m,
UBidiSol.m)
- Feb 22 Lecture Notes (Postscript,
PDF Format)
- Homework 2 Solutions (Postscript,
PDF format).
- Homework 3 (Postscript,
PDF format).
- M-files for Homework 3 (LLBidiSol.m,
UUBidiSol.m,
TriDiUL.m)
- Homework 3 Solutions (Postscript,
PDF format).
- Midterm Solutions (Postscript,
PDF format).
- HW3 Corrections: In problem 1, for the pay-later call,
the holder pays Q dollars only if S>E and not S>=E. The boundary condition
in problem 4 is u_0^j=g(x_{min},\tau_j). In problem 4, on page 3,
after z_1=y_1/l_1, add the line z_1=max(z_1,g_1). In problem 4, on page
3, line 6 from the top, it should be y=U^{-1}*b and NOT y=U^{-1}*g
- Extension: Assignment 3 is now due Tuesday, April 10.
- Homework 4 (Postscript,
PDF format).
- Homework 4 Solutions (Postscript,
PDF format).
- M-files for Homework 4 (EuroCall.m)
- Extension: Assignment 4 is now due on 12:00pm Monday May 7.
Lectures
Books on reserve
- Wilmott, Howison and Dewynne, Option Pricing (ENGR HG6042.W73)
- John Hull, Options, futures, and other derivatives (SAGE HG6024.A3.H91x)
- Darrell Duffie, Dynamic Asset Pricing Theory (SAGE HG4637.D84x)
- Wilmott, Derivatives (SAGE HG6024.A3W557x)
Useful Links
A practical introduction to Matlab (HTML, Postscript).
About Postscript and PDF
Both Postscript and PDF are specialized languages for describing
printable documents. Postscript is the older one, and it has
traditionally been used to distribute electronic versions of
mathematical texts.
Readers for both formats are available for several operating
systems and platforms. You can learn more about Postscript here. PDF stands
for "Portable Document Format" and it has been developed by Adobe. You
can get free readers from their
website.
Note that if you download and install Ghostscript you get both a
Postscript and PDF reader.