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Unit of study_

MATH4511: Arbitrage Pricing in Continuous Time

2025 unit information

The aim of Financial Mathematics is to establish a theoretical background for building models of securities markets and provides computational techniques for pricing financial derivatives and risk assessment and mitigation. Specialists in Financial Mathematics are widely sought after by major investment banks, hedge funds and other, government and private, financial institutions worldwide. This course is foundational for honours and masters programs in Financial Mathematics. Its aim is to introduce the basic concepts and problems of securities markets and to develop theoretical frameworks for pricing financial products and hedging the risk associated with them. This unit will focus on two ideas that are fundamental for Financial Mathematics. You will learn how the concept of arbitrage and the concept of martingale measure provide a unified approach to a large variety of seemingly unrelated problems arising in practice. You will also learn how to use the wide range of tools required by Financial Mathematics, including stochastic calculus, partial differential equations, optimisation and statistics. By doing this unit, you will learn how to formulate problems that arise in finance as mathematical problems and how to solve them using the concepts of arbitrage and martingale measure.

Unit details and rules

Managing faculty or University school:

Science

Study level Undergraduate
Academic unit Mathematics and Statistics Academic Operations
Credit points 6
Prerequisites:
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MATH2XXX and (a mark of 65 or above in MATH3XXX or STAT3021 or STAT3921)
Corequisites:
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None
Prohibitions:
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None
Assumed knowledge:
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Familiarity with basic probability (eg STAT2X11), with differential equations (eg MATH3X63, MATH3X78), achievement at credit level or above in MATH3XXX or STAT3XXX units or equivalent

At the completion of this unit, you should be able to:

  • LO1. Demonstrate a coherent and advanced knowledge of the concept of arbitrage and martingale measure and how they provide a unified approach to a wide variety of problems in finance
  • LO2. Formulate real-world financial problems in mathematical terms and determine the most suitable framework to analyse the resulting mathematical problem
  • LO3. Generate analytic and computational solutions to diverse problems of finance
  • LO4. Communicate mathematical analyses and solutions to mathematical and practical problems of financial mathematics clearly in a variety of media to diverse audiences
  • LO5. Take responsibility for their own learning by seeking out and using material from the research literature and elsewhere to extend their knowledge of methods of financial mathematics

Unit availability

This section lists the session, attendance modes and locations the unit is available in. There is a unit outline for each of the unit availabilities, which gives you information about the unit including assessment details and a schedule of weekly activities.

The outline is published 2 weeks before the first day of teaching. You can look at previous outlines for a guide to the details of a unit.

Session MoA ?  Location Outline ? 
Semester 1 2024
Normal day Camperdown/Darlington, Sydney
Session MoA ?  Location Outline ? 
Semester 1 2025
Normal day Camperdown/Darlington, Sydney
Outline unavailable
Session MoA ?  Location Outline ? 
Semester 1 2020
Normal day Camperdown/Darlington, Sydney
Semester 1 2021
Normal day Camperdown/Darlington, Sydney
Semester 1 2021
Normal day Remote
Semester 1 2022
Normal day Camperdown/Darlington, Sydney
Semester 1 2022
Normal day Remote
Semester 1 2023
Normal day Camperdown/Darlington, Sydney
Semester 1 2023
Normal day Remote

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Modes of attendance (MoA)

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