[Money=5][/Money]

The chapters are grouped into two main sections: The first focuses on the pricing of equity derivatives and comprises Chapter 1 to Chapter 9, and the second part focuses on the pricing of interest rate derivatives: Chapter 10 to Chapter 14.

Chapter 1 focuses on the derivation and foundations of the Black-Scholes model for asset pricing in the risk-neutral world. The Black-Scholes partial differential equation describes the evolution of all derivatives whose payoff is a function on a single underlying asset following geometric Brownian motion (GBM) and time.

Chapter 2 discusses Monte Carlo methods for valuation of European as well as path-dependent derivatives. Various random number generators for pseudorandom, quasi-random (deterministic), Sobol, and Faure sequences are discussed. Variance reduction techniques using control variates and antithetics are discussed to overcome the computational inefficiency of the Monte Carlo method in its basic form, which typically requires hundreds of thousands of simulations to achieve good accuracy.
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