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), Pass (3), Pass with credit (4), Pass with distinction (5)
• Established: 2012-03-08
• Established by:
• Revised: 2022-10-20
• Revised by: The Faculty Board of Science and Technology
• Applies from: Autumn 2023
• Entry requirements:

120 credits including 40 credits in mathematics. Several Variable Calculus, Several Variable Calculus, Limited Version, Several Variable Calculus M or Geometry and Analysis II. Probability and Statistics or Mathematical statistics KF. Proficiency in English equivalent to the Swedish upper secondary course English 6.

• Responsible department: Department of Mathematics

Learning outcomes

On completion of the course, 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.

If there are special reasons for doing so, an examiner may make an exception from the method of assessment indicated and allow a student to be assessed by another method. An example of special reasons might be a certificate regarding special pedagogical support from the disability coordinator of the university.

Other directives

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

Applies from: Autumn 2023

Some titles may be available electronically through the University library.

• Björk, Tomas Arbitrage theory in continuous time

Fourth edition.: Oxford: Oxford University Press, 2020

Find in the library

Mandatory