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Online course materials for MATH20912

Introduction to Financial Mathematics


Unit code: MATH20912
Credit Rating: 10
Unit level: Level 2
Teaching period(s): Semester 2
Offered by School of Mathematics
Available as a free choice unit?: N

Requisites

None

Aims

The course unit unit aims to enable students to acquire active knowledge and understanding of some basic concepts in financial mathematics including stochastic models for stocks and pricing of contingent claims.

Overview

This course is intended to serve as a basic introduction to financial mathematics. It gives a mathematical perspective on the valuation of financial instruments (futures, options, etc.) and their risk-management. The purpose of the course is to introduce students to the stochastic techniques employed in derivative pricing.

Learning outcomes

On completion of this unit successful students will be able to price financial derivatives

Future topics requiring this course unit

Third level courses in financial mathematics.

Assessment methods

  • Other - 20%
  • Written exam - 80%

Assessment Further Information

  • Coursework; Weighting within unit 20%
  • 2 hours end of semester examination; Weighting within unit 80%

Syllabus

1.Overview of basic concepts in securities markets.

2.Stochastic models for stock prices.

3.Hedging strategies and managing market risk using derivatives.

4.Binomial option pricing model.

5.Risk-neutral valuation, replication and pricing of contingent claims.

6.Black-Scholes analysis.

7.Interest rate models.

Recommended reading

  • J. Hull, Options, Futures and Other Derivatives, 7th Edition, Prentice-Hall, 2008.
  • P. Wilmott, S. Howison and J. Dewynne, The Mathematics of Financial Derivatives: A Student Introduction, Cambridge University Press, 1995

Feedback methods

Feedback tutorials will provide an opportunity for students' work to be discussed and provide feedback on their understanding.  Coursework or in-class tests (where applicable) also provide an opportunity for students to receive feedback.  Students can also get feedback on their understanding directly from the lecturer, for example during the lecturer's office hour.

Study hours

  • Lectures - 22 hours
  • Tutorials - 11 hours
  • Independent study hours - 67 hours

Teaching staff

Paul Johnson - Unit coordinator

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