The course begins with a review of pricing using the traditional binomial tree method and then moves on to present how these instruments may be priced using the efficient Binomial tree approach. The Monte Carlo simulation approach is used to prices vanilla and exotic options and convergence and variance reduction techniques are presented for improving the accuracy and time to convergence of the results.
Next, a step by step walkthrough of how to price structure products such as interest rate swaps, cross currency swaps, interest rate options, accruals swaps, range accrual notes and commodity linked notes is given, from the derivation of the interest rate term structure to the discounting of cash flows to determine the value of the instruments.
It concludes with a brief overview of various other advanced products including structured and credit products.
This course consists of six lessons:
- Lesson 1 – Binomial Trees – Efficient Approach
- Lesson 2 – Convergence and Variance reduction techniques for option pricing models
- Lesson 3 – Pricing Exotic Options using Monte Carlo Simulation
- Lesson 4 – How to determine Spot Rates and Forward Rates & Yield to Maturity
- Lesson 5 – Advanced Fixed Income Securities
- Lesson 6 – Other Advanced Products