Financial Mathematics
| Code | School | Level | Credits | Semesters |
| MATH4060 | Mathematical Sciences | 4 | 20 | Autumn UK |
- Code
- MATH4060
- School
- Mathematical Sciences
- Level
- 4
- Credits
- 20
- Semesters
- Autumn UK
Summary
The first part of the course introduces no-arbitrage pricing principle and financial instruments such as forward and futures contracts, bonds and swaps, and options.
The second part of the course considers the pricing and hedging of options and discrete-time discrete-space stochastic processes. The final part of the module focuses on the Black-Scholes formula for pricing European options and also introduces the Wiener process. Ito integrals and stochastic differential equations.
Target Students
Students taking MSc Financial and Computational Mathematics in the School of Mathematical Sciences. MMath and Natural Sciences students. Not available to other MSc students
Classes
- Four 1-hour lectures each week for 11 weeks
Assessment
- 100% Exam 1 (3-hour): Written examination
Assessed by end of autumn semester
Educational Aims
Thiscourse introduces basic concepts of financial mathematics, such as the pricing and hedging of financial instruments, with a focus on discrete models. Students taking thiscourse will develop knowledge and understanding of relevant mathematical and statistical models and their application to financial management and markets.Learning Outcomes
A student who completes this course successfully should be able to:
- L1 - define financial concepts such as arbitrage, forward and futures contracts, bonds and swaps, European and American options;
- L2 - price options using a hedging strategy in the discrete time setting;
- L3 - apply probability theory to discrete-time discrete-space stochastic processes;
- L4 - derive the Black-Scholes formula in the continuous time setting;
- L5 - define the Wiener process, geometric Brownian motion and Ito formula.