- Title: Introduction to Financial Mathematics
- Unit code: MATH20912
- Credit rating: 10
- Level: 2
- Pre-requisite units: MT1121 or MT1131, MT1141 (or some familiarity with basic probability and statistics), MT1222 or MT1232
- Co-requisite units:
- School responsible: Mathematics
- Member of staff responsible: Sergei Fedotov
- The programme 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.
- Brief description
- 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.
- Future topics requiring this course unit
- Third level courses in financial mathematics.
- 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. Stochastic volatility and stochastic interest rare.
- J. Hull, Options, Futures and Other Derivatives, 4th Edition, Prentice-Hall, 2000.
- P. Wilmott, S. Howison and J. Dewynne, The Mathematics of Financial Derivatives: A Student Introduction, Cambridge University Press, 1995
- Learning and teaching processes
- Two lectures and one examples class each week
- Coursework Weighting within unit 20%
- 2 hours end of semester examination; Weighting within unit 80%