TOTC1119 — STOCHASTIC SIMULATION WITH APPLICATIONS IN FINANCE

This course introduces Monte Carlo stochastic simulation with an emphasis on applications in finance and insurance. Students will learn to simulate univariate and multivariate random variables, as well as stochastic processes such as random walks, point processes, geometric Brownian motion, and Poisson processes. The simulations will be applied to numerically estimate key quantities of interest, including probabilities, Value at Risk, option prices, expected values, and integrals. The course also covers techniques to improve simulation efficiency (variance reduction methods) and approaches to statistical output analysis (such as confidence intervals). While the primary focus is on financial applications, additional examples from other fields will be presented. R programming will be employed throughout the course.

Requirements for Final Examination

Attendance score must be at least 5 (according to University regulations).

See Appendix 2, Rubric 1 for attendance evaluation.

Requirements for Class Attendance

Students are responsible for attending all scheduled classes.

In case of absence due to force majeure, students must actively acquire the knowledge through the materials provided by the lecturer and other assigned readings.

Requirements for In-class Behaviour

The course is conducted on the principle of mutual respect between lecturers and students.

Students are required to take full notes and participate in answering questions.

Students must read assigned materials in advance.

Homework assignments must be completed as required.

Students must not make noise and disturb others.

Laptops, tablets, and mobile phones may only be used for note-taking, calculations, or learning purposes, and must not be used for any other activities.