Simulation as a Teaching Tool in Finance

Jamal Munshi

Sonoma State University

October 20, 2014

An excessive use of algebra and stochastic calculus in undergraduate finance courses is an impediment to learning because it shifts our attention from finance to mathematics; and also because, for most of our students, algebra serves to obfuscate rather than to clarify the basic concepts in finance that we are trying to teach. In this paper we demonstrate with examples, particularly on the subject of risk, that finance lectures may be given without algebra by replacing equations on a blackboard with simple interactive simulation computer screens integrated with the lecture.

Number of Pages in PDF File: 17

Keywords: physics envy, Monte Carlo simulation, risky cash flows, valuation, uncertainty, valuation under uncertainty, stochastic algebra, capital budgeting, option pricing, numerical methods, computational statistics, portfolio theory, diversification, portfolio optimization

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Date posted: October 21, 2014 ; Last revised: October 29, 2014

Suggested Citation

Munshi, Jamal, Simulation as a Teaching Tool in Finance (October 20, 2014). Available at SSRN: https://ssrn.com/abstract=2512091 or http://dx.doi.org/10.2139/ssrn.2512091

Contact Information

Jamal Munshi (Contact Author)
Sonoma State University ( email )
1801 East Cotati Avenue
Rohnert Park, CA 94928
United States
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