Difference between revisions of "Math 435: Mathematical Finance"
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Revision as of 15:10, 3 April 2013
Contents
Catalog Information
Title
Mathematical Finance.
(Credit Hours:Lecture Hours:Lab Hours)
(3:3:0)
Offered
W
Prerequisite
One of Math 431, Stat 341, Stat 370.
Description
The binomial asset pricing model (discrete probability). Martingales, pricing of derivative securities, random walk in financial models, random interest rates.
Desired Learning Outcomes
The minimal expectation for this course is that students learn about mathematical finance in the context of discrete time and finite statespaces. It is therefore not required that students be taught about Brownian motion, the BlackScholes model, etc.
Prerequisites
Students should have had an introductory course in probability.
Minimal learning outcomes
Within the context mentioned above, students should be able to compute prices for derivative securities. They should be conversant with the standard terminology of mathematical finance and be able to use this terminology correctly in answering questions. At a minimum, students should understand the following concepts in the context of binomial decision trees:
 Martingales
 Markov processes
 Arbitrage
 Risk neutrality
 State prices
 Options
 Call and put
 American and European
 Stopping times
 Simple random walks
 Interest rate models
Textbooks
Possible textbooks for this course include (but are not limited to):
 Steven E. Shreve, Stochastic Calculus for Finance I: The Binomial Asset Pricing Model, Springer, 2005.
Additional topics
Courses for which this course is prerequisite
None.