Financial Engineering & Risk Management
Introduction to Mortgage Mathematics and Mortgage Backed
Securities
M. Haugh
G. Iyengar
Department of Industrial Engineering and Operations Research
Columbia University
Mortgage-Backed-Securities Markets
Recall that
Financial Engineering & Risk Management
Review of Basic Probability
M. Haugh
G. Iyengar
Department of Industrial Engineering and Operations Research
Columbia University
Discrete Random Variables
Denition. The cumulative distribution function (CDF), F (),
Financial Engineering & Risk Management
Introduction to Term Structure Lattice Models
M. Haugh
G. Iyengar
Department of Industrial Engineering and Operations Research
Columbia University
Fixed Income Markets
Fixed income markets are enormous and in fact b
Financial Engineering & Risk Management
Introduction to Term Structure Lattice Models
M. Haugh
G. Iyengar
Department of Industrial Engineering and Operations Research
Columbia University
Financial Engineering & Risk Management
Model Calibration
M. Haugh
G
Financial Engineering & Risk Management
The Multi-Period Binomial Model
M. Haugh
G. Iyengar
Department of Industrial Engineering and Operations Research
Columbia University
A 3-period Binomial Model
Recall R = 1.01 and u = 1/d = 1.07.
122.5
114.49
PPP
PP
Simulation of the mechanics of corn futures
Contract value
5000.00
Initial margin
1688.00
Maintenance margin
1250.00
http:/www.ccstrade.com/futures/corn-futures-c/margin/
Date
Feb 22nd
Feb 25th
Feb 26th
Feb 27th
Feb 28th
March 1
March 4
March 5
March 6
Ma
Financial Engineering & Risk Management
Option Pricing and the Binomial Model
M. Haugh
G. Iyengar
Department of Industrial Engineering and Operations Research
Columbia University
A Brief Overview of Option Pricing
In the next series of modules well study:
Financial Engineering and Risk Management
Interest rates and xed income instruments
Martin Haugh
Garud Iyengar
Columbia University
Industrial Engineering and Operations Research
Simple and compound interest
Denition. An amount A invested for n periods at