by Jovanka Lili Matic, Natalie Packham, Wolfgang Karl Härdle
Continue on SelfMadeQuant
Suggested foundations for options and derivatives pricing and monte carlo and numerical simulation. Specialist prerequisites vary by paper.
Build replication and risk-neutral probabilities in a tractable model.
Distinguish pricing probabilities from physical forecasts.
Understand convergence, sampling error and confidence intervals.
Generate reproducible samples and distinguish randomness from model assumptions.
Connect the pricing equation, closed-form value and implied volatility.
Turn a discounted payoff into an estimator.
Study dependence and alternatives to independent sampling.
Start in discrete time, move to Brownian motion, then read the original pricing argument and simulate it.