Financial Derivatives
7.5 credits
Syllabus, Master's level, 1MA209
A revised version of the syllabus is available.
- Code
- 1MA209
- Education cycle
- Second cycle
- Main field(s) of study and in-depth level
- Financial Mathematics A1N, Mathematics A1N
- Grading system
- Pass with distinction (5), Pass with credit (4), Pass (3), Fail (U)
- Finalised by
- The Faculty Board of Science and Technology, 8 March 2012
- Responsible department
- Department of Mathematics
Entry requirements
120 credit points including 40 credit points of Mathematics. Financial Theory I recommended.
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 and, possibly, oral examination at the end of the course. Moreover, compulsory assignments may be given during the course.
Reading list
- Reading list valid from Autumn 2023
- Reading list valid from Autumn 2022
- Reading list valid from Autumn 2020
- Reading list valid from Spring 2019
- Reading list valid from Autumn 2015
- Reading list valid from Autumn 2012, version 3
- Reading list valid from Autumn 2012, version 2
- Reading list valid from Autumn 2012, version 1