The course builds on mathematical models of bond and stock prices and focuses on the mathematical modeling of financial derivatives. It covers several major areas of financial derivative pricing modeling, namely: Efficient market and No-Arbitrage Principle; basics of fixed-income instrument and risk-free asset; Risk-neutral Probability and Risk-Neutral Pricing; Black-Scholes' arbitrage pricing of options and other derivative securities; Numerical Methods like a Binomial Tree for derivative pricing; the Greeks and Hedging using derivatives. Assuming only a basic knowledge of probability and calculus, it covers the material in a mathematically rigorous and complete way at a level accessible to second or third year undergraduate students. This course is suitable not only for students of mathematics, but also students of business management, finance and economics, and anyone with an interest in finance who needs to understand the underlying theory. Prerequisites: MATH 136 or MATH 151, ECON 100, and either MATH 141 or ECON 350.
| Distribution Area | Prerequisites | Credits |
|---|---|---|
| Math 136 or MATH 151, Econ 100, and either MATH 141 or ECON 350 | 1 course |