Seminar: Monte Carlo methods in econometrics and finance (F)

Course content

The purpose of the exercise is to offer the students an overview of the use of fundamental simulation-based methods (Monte Carlo methods) in finance. The focus will be on having a good intuition for the underlying statistical theory as well as how to implement the methods in practice via computer programs. 

 

The seminar paper can be based on several different themes. For example:

  • The results of an academic paper is challenged by replicating central results with a new twist, eg. Size/power of a proposed test using different data generating processes
  • Examining an interesting problem which can be examined via simulation, eg. The impact of discreet hedging in the Black-Scholes model
  • Review of a simulation problem and implementation of various solutions, fx. Far out of the money options and importance sampling, sensitivity estimation etc.
  • Discuss methods of variance reduction, covering the theory and implementing them in a program eg. A horse race of control variates, importance sampling, conditional Monte Carlo etc
Education

MSc programme in Economics

The seminar is primarily for students at the MSc of Economics

The seminar is part of the Financial line at the MSc programme in Economics,   symbolized by ‘F’.

 

Seminaret er ens med seminaret "Monte Carlo metoder i økonometri og finansiering (F)" (AØKK08374U). Grundet pensum overlab er det ikke tilladt at deltage på dette seminar, hvis man har deltaget på seminaret .

Learning outcome

In addition to the learning outcome specified in the Curriculum the student is after completing the seminar expected to be able to:

 

  • Have a basic overview of fundamental tools used in Monte Carlo methods applied in financial econometrics and finance
  • Be able to learn new and more advanced methods not covered in the course on their own
  • Be able to implement Monte Carlo methods in a suitable programming language such as Matlab, Python, R, C++ or Ox

Activities:
- Kick-off meeting
- Finding literatur and defining the project
- Writing process of the seminar paper
- Presentation of own project and paper
- Giving constructive feedback to another student´s paper
- Actively participating in discussions at the presentations and other meetings.

At the seminar the student is trained independently to
- identify and clarify a problem,
- seek and select relevant literatur,
- write a academic paper,
- present and discuss own paper with the other students at the seminar.

The aim of the presentations is, that the student uses the presentation as an opportunity to practice oral skills and to receive feedback. The presentations is not a part of the exam and will not be assessed.

There is no weekly teaching/lecturing and the student cannot expect guidance from the teacher. If the teacher gives a few introduction lectures or gives the opportunity for guidance, this as well as other expectations are clarified at the kickoff meeting.

Process:
It is strongly recommended that you think about and search for a topic before the semester begins, as there is only a few weeks from the kick-off meeting to the submission of the project description/ agreement paper.

Before the presentations, your nearly finished version of the seminar project paper must be uploaded in Absalon, as the opponents and the other seminar participants have to read and comment on the paper. It is important that you upload a paper that is so finalized as possible due to the fact that the value of feedback and comments at the presentation is strongly associated with the skill level of the seminar paper.

After the presentations, you can with a few corrections improve the seminar paper by including the feedback and comments emerged during the presentations. It is NOT intended that you rewrite or begin the writing of the full project AFTER the presentation has taken place.

  • Thor Pajhede (2017), "Backtesting Value-at-Risk: A Generalized Markov Framework", Journal of Forecasting
  • Paul Glasserman (2003), "Monte Carlo Methods in Financial Engineering", Springer, ISBN 978-0-387-21617-1
  • Søren Asmussen & Peter W. Glynn (2007), " Stochastic Simulation: Algorithms and Analysis", Springer, ISBN 978-0-387-69033-9

 

It is recommended to have a knowledge of basic finance, preferably including the Black-Scholes model

It is recommended that the student have a basic knowledge of how to program in a suitable language, eg. R, Ox, Python, C++, Matlab or Julia

BSc in Economics or similar

Schedule:
Autumn 2019:
• Kick-off meeting: September 13, 2019 at 15-18
• Extra days of introducing teaching: 20 + 27 September 15-18
• Deadline commitmentpaper: not later than October 1 at 10AM
• Deadline of pre-paper uploaded to Absalon: one week before presentations
• Presentations/Workshops: November 8, 9-15

All information regarding the seminar is communicated through Absalon including venue. So it is very important that you by yourself logon to Absalon and read the information already when you are registered at the seminar.

ECTS
7,5 ECTS
Type of assessment
Written examination
A seminar paper in English that meets the formal requirements for written papers stated in the curriculum of the Master programme and at KUNet for seminars.
____
Aid
All aids allowed

for the seminar paper.

The teacher defines the aids that must be used for the presentations.

___

Marking scale
7-point grading scale
Censorship form
External censorship
____
Criteria for exam assessment

Students are assessed on the extent to which they master the learning outcome for the seminar and can make use of the knowledge, skills and competencies listed in the learning outcomes in the Curriculum of the Master programme.

 

To receive the top grade, the student must with no or only a few minor weaknesses be able to demonstrate an excellent performance displaying a high level of command of all aspects of the relevant material.

  • Category
  • Hours
  • Seminar
  • 20
  • Project work
  • 186
  • English
  • 206