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Numerical methods in mathematical finance 2 (Summer Semester 2017)

Lecture: Wednesday 8:00-9:30 SR 3.61
Thursday 8:00-9:30 SR 3.61
Problem class: Friday 15:45-17:15 SR -1.031

Aims and scope of the lecture

Based on the first part of this lecture given in the winter term, more models and methods for option pricing will be presented. The central theme is the construction and analysis of numerical methods which approximate the solution of the corresponding differential equations in a stable, accurate and efficient way.

The following topics will (probably) be discussed:

  • Multilevel Monte-Carlo methods
  • Historical, implied and local volatility
  • Jump-diffusion models and integro-differential equations
  • Finite element methods for the Black-Scholes equation
  • Sparse grids for basket options and other high-dimensional problems

Students who have not attended part 1 of the lecture can attend part 2 provided that they have some background in mathematical finance/option pricing and numerical methods for differential equations.

Exercise classes

In the exercise class, students will be asked to write Matlab programs which illustrate the theoretical results presented in the lecture. The exercises can be solved in pairs or alone, and with the assistance of the tutor. Participants are expected to be familiar with Matlab.


The exams (oral, 30 minutes approx.) will take place on 9.8.2017 (Wednesday) and on 21.8.2017 (Monday). Questions about the lecture and the programming exercises will be asked.

If you want to take the exam, please send an e-mail to sonja.becker@kit.edu with the following informations: your name, your immatriculation number, date of the exam (9.8. or 21.8. or both), preferences/restrictions concerning the time (only if there are important reasons). The deadline for sending this e-mail is Friday, 28.7.2017.

In addition, you have to register for the exam as usual via the corresponding web page.

Lecture notes

... are no longer available.


The results of the evaluation can be found here. The exercise class could not be evaluated because less than six person were present.