46-950 Numerical Methods

6 units, Carnegie Mellon University

This course covers numerical methods relevant to solving the partial differential equations of mathematical finance and fitting yield curves. Theoretical and practical issues are treated. Topics include but are not limited to background materials in partial differential equations, examples of exact solutions including Black Scholes and its relatives, finite difference methods including algorithms and question of stability and convergence, forward equation and the Dupires formula, model calibration, exotic option and free boundary problem yield curve fitting including bootstrapping nonparametric approach, parametric approach and smoothing splines.

Prerequisites: 46-945

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