This unit is an introduction to the mathematical theory of modern finance. Topics include: notion of arbitrage, pricing riskless securities, risky securities, utility theory, fundamental theorems of asset pricing, complete markets, introduction to options, binomial option pricing model, discrete random walks, Brownian motion, derivation of the Black-Scholes option pricing model, extensions and introduction to pricing exotic options, credit derivatives. A strong background in mathematical statistics and partial differential equations is an advantage, but is not essential. Students completing this unit have been highly sought by the finance industry, which continues to need graduates with quantitative skills. The lectures in the Normal unit are held concurrently with those of the corresponding Advanced unit.
Three 1 hour lectures and one 1 hour tutorial per week.
Two class quizzes and one 2 hour exam (100%)
12 credit points of Intermediate Mathematics, including (MATH2070 or MATH2970)Prohibitions
MATH3975 or MATH3015 or MATH3933