The objective of this program is to develop a systematic approach to evaluation methods for the pricing and hedging of derivative instruments. The various models studied in Program 1 will be assumed for the stochastic dynamics of the underlying assets. The techniques developed will be extended to other financial quantities such as risk measures, and will include real market frictions such as transaction costs.

The program comprises three sub-strands in:

Analytic and Quasi-Analytic Methods

Here, a range of quasi-analytic and analytic methods for evaluating derivative prices and financial quantities will be developed.

Partial Differential Equation, Tree and Lattice Methods

Simulation Based Methods

This project will develop improved methods for the numerical solution of stochastic differential equations and stochastic delay equations. The focus will be on specific problems in evaluating credit risk and other financial quantities.

For further information, contact Professor Eckhard Platen or Professor Alex Novikov