Assignment -

What to write - All questions must be answered

(a) Writing a LATEX document describing the mathematics used to calculate your answer and clearly stating the results of the exercise. This document should contain a copy of your individual question, your candidate, your name and student number. You are given a tex file containing the question and your personal details that you should use. In the rest of the document you must:

(i) Concisely describe the mathematics used to answer the questions. For example you should state any difference equations used to solve the problem or any mathematical formulae you have used.

(ii) Concisely describe how you have tested whether your answer is correct. These tests must be fully automated.

(iii) State the values you have computed.

This document should be short. Typically the part of the L ATEX document containing your own work should be no more than 2 pages in length. A few paragraphs will normally be sufficient. Unnecessarily verbose answers will be penalized.

(b) Writing MATLAB code that computes the answer to the question. Your MATLAB code must contain at least two functions:

(i) answerProblem: this function must take no parameters and must re-turn the values specified in the question.

(ii) testall: this function must take no parameters and must run all the tests for your question. It is up to you what tests you run.

Your code must take no longer than 5 minutes to run. Make sure your functions have EXACTLY these names including the punctuation.

Mathematical notation is used in all questions. In particular quantities such as the risk free rate, r and the volatility σ are given as absolute values rather than as percentages. This means the values can be used directly in standard mathematical formulae. The units of prices will always be dollars. The units of time will always be years. These units are only used implicitly and you need not mention units in your answer either. Options should be assumed to be European options, unless stated otherwise in the question.

The following notation may also be used in your question: 1X denotes the indicator function of the set X.

Finding your personalized question

All students are set a different question and must answer their own question. You may not request a different question.

To find your question download the zip file of questions from Keats. Inside this you will find a folder with your name. This folder contains a pdf-file of your question and tex source file.

References - J. Armstrong. Lecture Notes. FM06: Computational and Numerical Methods for Mathematical Finance.

Attachment:- Assignment Files.rar