IEOR E8100 Advanced Topics In Financial Engineering: Fall 2015
Instructor: Prof. Tim Leung (IEOR)
Columbia University
Objectives
The goal of this graduate-level course is to present the analytical and computational methods in Financial
Engineering. The course will begin with a rapid review of probability theory and stochastic calculus. We
will study the following topics (~2 weeks/topic):
- Stochastic models for asset prices: stochastic volatility, Levy, and jump diffusion models
- Valuation of futures, and European, American, and path-dependent/exotic options
- Dynamic and static hedging and trading strategies
- Portfolio optimization: stochastic control, HJB equation, computational methods
- Optimal stopping problems: variational inequality, probabilistic approach, numerical methods
- Optimal mean reversion trading
- Trading with transaction costs
Slides, lecture notes and supplementary reading materials will be provided. Students are expected to
read a small number of journal articles as well.
Homework Policy
3 HWs + 1 project (report and presentation)
You will need to use MATLAB throughout the course
Grading: 15% x 3 HWs, 35% x 1 final exam, 20% x 1 project. No Midterm.
Pre-requisites:
IEOR E4706 Foundations of Financial Engineering (or IEOR E4700)
IEOR E4707: Financial Engineering: Continuous-Time Models (or course(s) on Stochastic Differential
Equations)