ICM299-Numerical Methods for Financial Engineering

Module Provider: ICMA Centre
Number of credits: 20 [10 ECTS credits]
Terms in which taught: Spring term module
Non-modular pre-requisites:
Modules excluded:
Current from: 2020/1

Module Convenor: Dr Peter Sweby

Email: p.k.sweby@reading.ac.uk

Type of module:

Summary module description:

This module is delivered at University of Reading

This module introduces the major numerical methods required for quantitative work in finance, with a particular emphasis on the tools required for the implementation of the major derivative pricing models.


This module aims to introduce the major numerical methods required for quantitative work in finance, with a particular emphasis on the tools required for the implementation of the major derivative pricing models, including an introduction to coding in VBA.

Assessable learning outcomes:

By the end of the module, it is expected that students will be able to:

  • Understand the basic concepts of numerical approximation

  • Solve linear and nonlinear systems of equations

  • Implement optimization and calibration methods

  • Implement interpolation methods

  • Build high standard computer programmes for derivative pricing models using

  • Tree-based methods

  • Monte Carlo simul ations

  • Finite Difference methods

Additional outcomes:

Students will learn the fundamental techniques that will enable them to pursue further research in computational finance.

Outline content:
•Foundations of Numerical Computations
•Numerical solution of Systems of Linear and Nonlinear Equations
•Numerical Optimization techniques
•Calibration methods
•Interpolation methods
•Simulation of Stochastic Differential Equations
•Pricing of financial derivatives Monte Carlo simulations
•Pricing of financial derivatives with Binomial and Trinomial Trees
•Pricing of financial derivatives Finite Difference methods

Brief description of teaching and learning methods:
Teaching is via lectures enhanced with practical exercises, with reference to recommended textbooks and journal articles.

Contact hours:
  Autumn Spring Summer
Lectures 18 2
Practicals classes and workshops 10
Guided independent study:      
    Wider reading (independent) 20
    Exam revision/preparation 20 10
    Advance preparation for classes 9 1
    Other 80
    Completion of formative assessment tasks 10
    Reflection 20
Total hours by term 0 187 13
Total hours for module 200

Summative Assessment Methods:
Method Percentage
Written exam 50
Written assignment including essay 50

Summative assessment- Examinations:
2 hours closed book written examination

Summative assessment- Coursework and in-class tests:

The written assignment is an individual project to be submitted in week 1 of the Summer term.

One project set week 2 of Spring Term, due end of week 1 of Summer term.

Formative assessment methods:

Penalties for late submission:
Penalties for late submission on this module are in accordance with the University policy. Please refer to page 5 of the Postgraduate Guide to Assessment for further information: http://www.reading.ac.uk/internal/exams/student/exa-guidePG.aspx

Assessment requirements for a pass:
50% weighted average mark

Reassessment arrangements:

By written examination only, to be taken in August/September, as part of the overall examination arrangements for the MSc programme

Additional Costs (specified where applicable):

1) Suggested text books: Manfred Gilli, Dietmar Maringer and Enrico Schumann: Numerical Methods and Optimization in Finance Academic Press, 2011, ISBN-10: 0123756626, £63.99. 2) Specialist equipment or materials: 3) Specialist clothing, footwear or headgear: 4) Printing and binding: 5) Computers and devices with a particular specification: 6) Travel, accommodation and subsistence:

Last updated: 29 April 2020


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