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School of Mathematics

# MATH20912

General Information
• 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
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## Unit specification

Aims
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.
Intended learning outcomes
On completion of this unit successful students will be able to price financial derivates
Future topics requiring this course unit
Third level courses in financial mathematics.

### 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. Stochastic volatility and stochastic interest rare.
Textbooks
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
Assessment
Coursework Weighting within unit 20%
2 hours end of semester examination; Weighting within unit 80%

## Arrangements

Online course materials are available for this unit.

Last modified: October 05, 2010 5:47:57 PM BST.