A
Trader’s Guide to Monte Carlo Methods
Objective: a no more
"black-box" philosophy is used to provide clear description and
"working" knowledge of the Monte Carlo method to apply to real world P&L, position keeping, and risk management
issues, and:
·
clear working understanding of Monte Carlo methods in pricing and
risk management
·
will be able to set-up your own simple MC valuations
·
will clearly understand the use and misuse of MC in risk
management
·
will clearly understand the application of MC to portfolio
valuation and risk management
·
to use MC for the simulation of trading/hedging/position strategy
analyses
·
100% of the delegates to be able to price a vanilla call via MC,
and 70% of the delegates to price and risk value virtually any single
factor security or derivative via MC
Additionally
·
includes many worked examples (vanilla, exotic, structured
products)
·
includes spreadsheet’s and code
·
more of a hands-on workshop than seminar
·
usage of spreadsheet as well as HGL code for pricing and risk
management
Audience:
intended for market professionals and focusing on end users (some understanding of markets and products helpful), such
as:
·
Traders, sales, support,
· Management, treasurers,
·
Risk Management
·
intended for everybody, but focusing on end users such traders,
sales staff, financial engineers, F/Office and support personnel, rather than a experienced quants
(unless they want to know how trader’s think)
1)
Overview: consideration of the big picture and objectives of
securities and derivatives valuation and risk management
2)
The Basics: presentation on the origins and meaning of
quantitative methods and models used to represent stochastic (uncertain)
processes and the applications to finance.
This section culminates not only with a clear understanding of the
fundamentals of all pricing models, but also a worked example of pricing a
vanilla call and put options with MC.
3)
Exotic Options: a series of workshops introducing a range of
exotic options (Early exercise, Barriers, Digitals, Compounds, Asian), there description/usage and the valuation difficulty.
Each exotic is explicitly valued via MC with clear presentation of
approach and “simple spreadsheet and (VBA) code”.
4)
Representation of the Price Process: extension of the ideas
from 2) to more general cases of modelling more complex price
5)
Special Cases: process and financial instruments (e.g. term
structure, correlation products, stochastic volatility etc).
6)
Hedging with MC: this section illustrates the pros and cons of
using MC based methods for assessing position risk for conventional position
exposure calculations as well as for considering MC as a method for holding
period analyses.
7)
Portfolio Simulation 1: introduces MC as a technique for assessing
trading strategies of a position over a holding period, case study of a
convertible bonds position hedging strategy analyses.
8)
Portfolio Simulation 2: extends 7) to consider MC as a technique
for analysing portfolio exposure and risk adjusted return for general portfolios
under multiple strategies.
9)
Implementation of the MC Method: presentation on the issues, costs
and benefits of implementing MC
10)
Properties of the MC Method: mathematical and usage properties of
MC, random number generators, variance reduction methods
11)
Pros and Cons of the MC Method: comparison of the MC method to
analytic, tree and PDE methods in terms of set-up cost, usage cost, and
implications.
922
Pages of
comprehensive and extensively illustrated Handout Notes (see samples
here)
Plus copies of relevant TG2 Books/e-Books
Note:
Seminars can be tailored to your trading, risk, client, and systems needs.
Submit your needs, and/or "cut/paste" from other Seminars (see entire "standard"
list HERE)
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