In a complicated financial world, a detailed understanding of the application of quantitative techniques is essential. This course provides an in-depth coverage of practical quantitative methods important in today's financial markets.

Course Objectives

To provide practitioners with a practical understanding of how a range of tools can be used to manage, analyze and price financial instruments. Participants will study:

  • Principal components
  • Duration and the impact of convexity
  • Methods of interpolation, their uses, and limitations
  • Regression techniques
  • Implementing Monte Carlo simulations
  • Binomial and trinomial tree building
  • How to model assets and price derivatives in continuous time

Date: 10th - 12th December 2018

Venue: Central London

Fee: £1195 per day

You might be eligible for preferential rates. Please contact us to check if your company is a member of the LFS Global Client Programme.

Who The Course is For

Anyone who needs to understand a comprehensive set of tools for managing risk in the financial markets. The seminar will be of special interest to:

  • Risk managers
  • System developers
  • Traders and derivatives teams
  • Consultants and brokers

Prior Knowledge

Basic understanding of financial markets and probability (covered in Maths Refresher).

Course Outline

Day One

Bootstrapping yield curves

  • The form of the discount function
  • Methods of interpolation
  • OIS, Libor and N-way curve building
  • Maximum smoothness
  • Cubic splines in detail
  • Interpolation and the forward curve

Workshop: Interpolation, forward curves, and pricing

Curve building techniques for use with limited data

  • Applying multiple regression to bond data
  • Finding a functional form for the yield curve
  • Basis splines and other approximating functions
  • Econometric issues
  • Extension to credit and inflation curve building

Workshop: Building a bond market yield curve

Day Two

Principal components and yield curve hedging

  • Review of single and two-factor duration
  • Principal components
  • Using principal components with B-splines to derive hedging factors
  • Bond arbitrage and portfolio immunization

Workshop: Portfolio Immunisation

Modeling Movements in Asset Prices: Monte Carlo Simulation

  • Asset prices represented by Brownian motion
  • Monte Carlo simulation
  • Random number generation
  • Control variate and antithetic variable techniques
  • Low discrepancy sequences
  • Multiple dimensions and stochastic volatility
  • Simulating SABR processes

Workshop: Building and Running a Monte Carlo Simulation

Day Three

Modeling Movements in Asset Prices: trees

  • Alternative Futures
  • Probabilities and pseudo probabilities
  • The binomial tree
  • Trinomial trees
  • Trees and Monte Carlo
  • Risk-neutral valuation
  • Valuing standard options

Workshop: Building a binomial tree for pricing and hedging

Using Trees for Pricing Derivatives

  • Early exercise and Bermudan structures
  • Deriving the “Greeks”
  • Modifications for Smile and Skew

Modeling Asset Prices in Continuous Time

  • Some basic stochastic calculus and Ito's Lemma
  • Normal and lognormal distributions
  • Applying the Black-Scholes analysis
  • Finite difference techniques for continuous time problems

Workshop: Comparing binomial trees and Monte Carlo techniques

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Last updated August 9, 2018
This course is Campus based
Start Date
Dec. 2019
3 days
3,585 GBP
£1195 per day. You might be eligible for preferential rates. Please contact us to check if your company is a member of the LFS Global Client Programme.
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Start Date
Dec. 2019
End Date
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Dec. 2019

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Implementing Fundamental Quantitative Techniques