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
clear working understanding of Monte Carlo methods in pricing and
will be able to set-up your own simple MC valuations
will clearly understand the use and misuse of MC in risk
will clearly understand the application of MC to portfolio
valuation and risk management
to use MC for the simulation of trading/hedging/position strategy
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
includes many worked examples (vanilla, exotic, structured
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
intended for market professionals and focusing on end users (some understanding of markets and products helpful), such
Traders, sales, support,
· Management, treasurers,
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)
Overview: consideration of the big picture and objectives of
securities and derivatives valuation and risk management
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.
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”.
Representation of the Price Process: extension of the ideas
from 2) to more general cases of modelling more complex price
Special Cases: process and financial instruments (e.g. term
structure, correlation products, stochastic volatility etc).
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
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.
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.
Implementation of the MC Method: presentation on the issues, costs
and benefits of implementing MC
Properties of the MC Method: mathematical and usage properties of
MC, random number generators, variance reduction methods
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
comprehensive and extensively illustrated Handout Notes (see samples
Plus copies of relevant TG2 Books/e-Books
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"