Advanced Financial
Mathematics Workshop
Day One
09.00 - 09.15 Welcome and Introduction
09.15 - 12.00 Yield Curve Estimation and
Cash Flow Analysis
- Yield Curves, Par Curves and Zero Coupon
Curves
- Estimation Techniques
- Bootstrapping
- Cubic Spline
- Other Estimation Techniques
- Estimating and Valuing Complex Cash Flows
- Cash flows with pre-payment features
- Computer Workshop (Excel/VB)
Participants program yield curve estimation routines in
Excel/VB and use the estimated yield curves to value complex
cash flows
12.00 - 13.00 Lunch
13.00 - 16.30 Monte Carlo Simulation
- Introduction to Monte Carlo Simulation
- Monte Carlo Toolkit
- Generating random numbers
- Sampling from normal/lognormal
distributions
- Stochastic Differential Equations
- Cholesky Decomposition
- Variance reduction techniques
- Stratified sampling
- Control Variate
- Antithetic sampling
- Computer Workshop (Excel/VB)
Participants program and test sampling routines, SDE’ s and
Cholesky factorisation routines
Day Two
09.00 - 12.00 Pricing Complex Instruments
- Pricing Complex Interest Rate Products
- Defining and Calibrating Interest Rate
Models
- Pricing Interest Rate Options and
Structured Interest Rate Products
- Pricing Exotic Interest Rate Structures
Using Monte Carlo Simulation
- Calculating VaR for complex instruments
- Computer Workshop (Excel/VB)
Participants price selected (exotic) structures using MC
simulation
12.00 - 13.00 Lunch
13.00 - 16.30 Principal Components
Analysis
- Common Factors Affecting Bond Returns
- Overview of Multi-Factor Interest Rate
Risk Models
- The Factor Model
- Eigenvalues, Eigenvectors and the Yield
Curve
- Calculating and Interpreting Factor
Loadings
- Using the Factor Model to Calculate VaR
- Factor Immunization for Hedging Yield
Curve Fluctuations
- Monte Carlo Simulation Using PCA
- Computer Workshop
Participants use PCA to estimate risk factors and construct
optimal, factor-immunized portfolios
Evaluation and Termination of the
Workshop
