Financial Mathematics II
7.5 credits
Syllabus, Master's level, 1MA041
This course has been discontinued.
- Code
- 1MA041
- Education cycle
- Second cycle
- Main field(s) of study and in-depth level
- Mathematics A1F
- Grading system
- Fail (U), Pass (3), Pass with credit (4), Pass with distinction (5)
- Finalised by
- The Faculty Board of Science and Technology, 28 May 2013
- Responsible department
- Department of Mathematics
Entry requirements
120 credit points including the course Financial theory
Learning outcomes
In order to pass the course (grade 3) the student should
- be able to construct models for pricing finansial derivatives;
- be able to price simple financial derivatives with risk neutral valuation;
- be able to present financial models and pricing to various users of financial instruments;
- be able to use stochastic calculus in various areas of application;
- know 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 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 at the end of the course.