Master’s studies

Syllabus for Financial Derivatives

Finansiella derivat

Syllabus

  • 7.5 credits
  • Course code: 1MA209
  • Education cycle: Second cycle
  • Main field(s) of study and in-depth level: Mathematics A1N, Financial Mathematics A1N
  • Grading system: Fail (U), 3, 4, 5.
  • Established: 2012-03-08
  • Established by: The Faculty Board of Science and Technology
  • Revised: 2015-06-24
  • Revised by: The Faculty Board of Science and Technology
  • Applies from: week 27, 2015
  • Entry requirements: 120 credits including 40 credits in mathematics. Financial Theory I is recommended.
  • Responsible department: Department of Mathematics

Learning outcomes

In order to pass the course (grade 3) the student should be able to

  • construct models for pricing of financial derivatives;
  • price simple financial derivatives with risk neutral valuation;
  • present financial models and pricing to various users of financial instruments;
  • use stochastic calculus in various areas of application;
  • give an account of Feyman-Kac's representation formula and be able to use it to find solutions of parabolic partial differential equations.

Content

Diffusion processes, stochastic integration and Ito's formula. Arbitrage theory in continuous time. Black-Scholes equation for pricing of financial instruments. Feynman-Kac's representation formula. Risk neutral valuation and hedging. Complete and incomplete markets. Applications to financial instruments such as options, forwards, futures, swaps, interest rate and currency derivatives.

Instruction

Lectures and problem solving sessions.

Assessment

Written examination and assignments.

Other directives

The course can not be included in higher education qualification together with Financial mathematics II or the equivalent.

Reading list

Applies from: week 27, 2015

  • Björk, Tomas Arbitrage theory in continuous time

    3rd ed.: Oxford ;a New York: Oxford University Press, 2009

    Find in the library

    Mandatory