FDM for Computational Finance

YouZhirun

Member
C++ Student
I am a fresh graduate in Financial Engineering.
I hear PDE plus FDM is useful for option pricing(BS PDE model) in reality. Is it how people do in the industry?
And constructing the system is usually the quantitative developer's job?
 

Daniel Duffy

C++ author, trainer
PDE/FDM is useful for mostly 1 and 2 (maybe 3) factor models (pricing and calibration) For n-factor you need some form of simulation, for example Monte Carlo. And combined MC/PDE models are possible.
FDM's strong points are efficiency and predictable output.
 

Daniel Duffy

C++ author, trainer
I am a fresh graduate in Financial Engineering.
I hear PDE plus FDM is useful for option pricing(BS PDE model) in reality. Is it how people do in the industry?
And constructing the system is usually the quantitative developer's job?
Some universities have it as a requirement.
 
Top