- Lecture Notes / Slides
- Examples / Solutions
- Reading List / Past Papers
Lecture notes for the course will appear here on Mondays for the following week.
Introducing the course is taught, what is to be expected and how it is assessed. We introduce some elementary economics including the time value of money and models for stock prices.Download
2. Properties of SDEs
Some general properties of SDEs are introduced. The extremely important Ito's lemma is quoted.Download
Introducing simple financial derivative contracts, and how they are combined to create portfolios.Download
5. Trading with Portfolios
Trading strategies. Some further market descriptions such as bonds and the no-arbitrage principle.Download
Upper and Lower Bounds on Put Options. Proof of Put-Call Parity by No-Arbitrage Principle. Example on Arbitrage OpportunityDownload
8. One Step Binomial
One-Step Binomial Model for Option Price. Risk-Neutral Valuation. Examples.Download
10. Multi-Period Binomial Trees
Binomial Model for Stock Price. Option Pricing on Binomial Tree. Matching Volatility σ with u and dDownload
11. American Option and Replicating Portfolio
American Put Option Pricing on Binomial Tree. Replicating PortfolioDownload
Examples and solutions for the course will appear here on Fridays.
Examples Sheet 3
No Arbitrage Principle, Upper and Lower Bounds: Examples to accompany lectures 6 to 7.Download
Reading list for the course.
The Mathematics of Financial Derivatives
Wilmott, P., Howison, S., Dewynne, J., "The Mathematics of Financial Derivatives", Cambridge University Press, (1995) ISBN: 0521497892
Please follow the link for podcasts of the lecture, the written additions to the notes will be recorded there. If you log onto Blackboard, the discussion forum can be found under the communication tab. If you are already logged in follow the link below. I will try to answer any queries or emails on the forum.