Stochastic Simulation and Modeling- IT461
Instructor: Jaideep Mulherkar
DA-IICT, Gandhinagar
Course description: Course gives students exposure to engineering problems that are probabilistic in nature. A simple example is a single server queue where both the processing time and the arrival time is a random number. Such queuing models occur in inventory management as well as traffic and internet protocol modeling. Often it is not possible or analytically difficult to obtain a mathematical formula for a quantity of interest, for example in the case of a queue it could be the average waiting time per customer. In this case we try to simulate the model on a computer to numerically compute the quantity of interest. The basic method of stochastic simulation is the Monte Carlo method which solves problems with very large degrees of freedom by imitating a random process. Students learn about the basics of Monte Carlo method and also statistical techniques surrounding it. Another application of probability theory is in the world of financial option pricing. The course will also give an introduction to financial option pricing in particular the Binomial asset pricing model and the famous Black-Scholes model. Throughout the course emphasis will be on problem solving and implementations.
Prerequisites: Probability and Statistics (SC215).
Textbooks:
Simulation, Sheldon Ross, 5th ed., Academic press, Elsevier. .
Introduction to Probability models, Sheldon Ross, Academic press, Elsevier.
Options, Futures and other Derivatives, J.C. Hull and S. Basu, Pearson, 2010.
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Course Notes