AERC Technical Workshop

Host Institution: AERC (African Economic Research Consortium)

Time: 26th February - 9th March, 2018

Location: Nairobi, Kenya

This event is an exclusive technical workshop organised by AERC (African Economic Research Consortium) aiming to provide intensive technical training on "Monte Carlo Simulations" and "Impact Evaluation". Full programme is available to download.

Prof Issouf Soumaré and Prof Robert Lensink - Co-investigators of the CGF's " Inclusive Finance Project " are cordially invited as the course instructors to deliver lectures at the workshop.

Their participation at the AERC Workshop is part of the work funded under the research project on "Delivering Inclusive Financial Development and Growth" (ESRC Reference: ES/N013344/2).

Week 1

Time:  26th February – 2nd March

Instructor: Professor Issouf Soumaré

Topic: Monte Carlo Simulations in Finance

Training objective:
Nowadays, many financial instruments and products are very complex and difficult to price. For many of them, there are no closed-form analytical solutions. One way to overcome this complexity in pricing financial instruments is to use Monte Carlo Simulation method. The objective of this training is to build the capacity of the participants in the use of Monte Carlo simulations techniques for economic and financial modelling. At the end of the training, the participants will learn how to price, assess risk and hedge complex financial instruments using Monte Carlo simulation. More specifically, participants will:

• be able to use probability and statistical theories to model random processes in finance;

• be familiarized with stochastic processes commonly used in finance;

• understand the foundation of Monte Carlo simulations;

• be able to perform financial derivatives pricing and risk assessment using Monte Carlo simulations.

Target audience:
The target audience comprises industry professionals, graduate students and researchers interested in finance, in particular those using regularly or who intend to use financial models for pricing and risk management. Participants are expected to have the basics of probability and statistics, introductory finance and be familiar with Excel (VBA) or Matlab.

Reference:
Huu Tue HUYNH, Van Son LAI & Issouf SOUMARÉ. Stochastic Simulation and Applications in Finance with MATLAB Programs. Wiley, 2009.

Week 2

Time:  5th March – 9th March

Instructors: Professor Robert Lensink & Adriana Garcia

Topic: Impact Analysis

Course objectives: The objective of this part of the course is to provide participants with
better knowledge about the theory and practice of impact analyses in developing countries.
Special attention will be given to the impact of “financial inclusion” projects.

Course Description: Until recently, empirical testing of the impact of financial interventions,
such as microfinance, was extremely weak, and controversial. Most research on the impact
of microfinance in the broadest sense suffered from severe methodological problems:
almost none of the available empirical studies appropriately addressed problems related to
self-selection bias and/or program placement bias.

Fortunately, in the last few years, we have seen several new empirical analyses using
rigorous methodologies. These new analyses are often based on so-called randomized
controlled trials. In a randomized controlled trial the impact of an intervention is studied by
randomly assigning different households to treatment and control groups.

In this short course, we will discuss the major aspects of experimental design in the context
of financial interventions in developing countries. Special attention will be given to financial
interventions. The aim is to provide a better understanding of the theory and practice of
field experiments in developing countries. For example, participants will e.g. learn how to
design randomized experiments to measure impacts of financial inclusion interventions.

STATA: during the afternoon sessions of the course we will use STATA to conduct practical
examples.

Background Literature:
Glennerster and Takavarasha (2013), Running Randomized Evaluations: A Practical Guide,
Princeton University Press.