PRICING DERIVATIVES USING MONTE CARLO TECHNIQUES
ISSUES:
 
Pricing non standard derivatives is a complex process. Monte Carlo techniques offer a way of dealing with
this problem in some circumstances. There are issue of bias in some monte carlo techniques and ways of
minimising or eliminating this. Do these pricing formulas give higher profits on average than simple
approximation formulas? This project requires extensive programming.
 
SELECTED READING:
 
Boyle (1977), “Options, a monte carlo approach”, Journal of Financial Economics, 4, pp 323-338.
 
Broadie and Glasserman (1997), “Pricing American style securities using sim英语论文网 【http://www.51lunwen.org】ulation”, Journal of economic
dynamics and control, 21,8-9, pp 1323- 1353.
 
Boyle, Broadie and Glassman (1997), “Monte carlo methods for security pricing”,  Journal of economic
dynamics and Control, 21, 8-9, pp 1267-1323
 
DATA SOURCE: No Data Required
 TESTING THE BEHAVIOUR OF FOREIGN EXCHANGE MARKETS

ISSUES:
Testing PPP, UIP, Market fundamentals, linkages between exchange rates, causality between markets.
Techniques include standard estimation techniques, structural modelling of fundamental models,
cointegration between markets, causality tests. High frequency data issues and Chaos.
 
SELECTED READING:
 
Frankel (1979), “On the mark: A theory of floating  exchange rates based on real interest differentials”
American Economic Review, 69, 4, pp 610-622.
 
Baillie and Selover (1987), “Cointegration and models of exchange rate determination” International Journal
of Forecasting, 3, pp 43-52.
 
DATA SOURCE: DataStream, Ecowin

CONVERGENCE IN FINANCIAL MARKETS

ISSUES:
 
Defining convergence, convergence and market efficiency, structural change and convergence in markets,
convergence in trading and political blocks (e.g. ASEAN, Europe, EMU, Eastern Europe and West Europe).
Project involves econometric techniques such as regression analys 本文来自：英语论文网 【http://www.51lunwen.org】