Difference between revisions of "Math 435: Mathematical Finance"
Revision as of 15:10, 3 April 2013
(Credit Hours:Lecture Hours:Lab Hours)
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 state-spaces. It is therefore not required that students be taught about Brownian motion, the Black-Scholes model, etc.
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:
- Markov processes
- Risk neutrality
- State prices
- Call and put
- American and European
- Stopping times
- Simple random walks
- Interest rate models
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.
Courses for which this course is prerequisite