Fall 2006: Mathematics of Finance (V63-0250-001)
Instructor: Julien Dubédat
Lectures: MW 2:00-3:50, Silver 515
Office hours: MW 4:00-5:00 (WWH 1010)
Grading: Quiz 1 (10%), Midterm (25 %), Quiz 2 (10%), Final (35%),
Homework (20%) (subject to adjustments)
There will be no make up exams and no extra credits.
Wed 10/04: Quiz 1
Mon 10/30: Midterm
Wed 11/29: Quiz 2
Mon 12/18: Final
HW Set #1, due Mon 09/25, solutions
HW Set #2, due Mon 10/2, solutions
HW Set #3, due Wed 10/11, solutions
HW Set #4, due Mon 10/23, solutions
HW Set #5, due Mon 11/6, solutions
HW Set #6, due Mon 11/13, solutions
HW Set #7, due Mon 11/20, solutions
HW Set #8, due Mon 11/20, solutions
Syllabus:
The goal of the class is to introduce central concepts of financial
engineering and the underlying mathematical techniques, in particular:
risk-free and risky assets; (discrete time) market models; portfolio
management and optimization; arbitrage and option pricing.
The principal source for the course is Chapters 1-8 of the textbook Mathematics for finance, Capinski
and Zastawniak.
[Probability background]
Risk-free and risky assets
Risk-free assets: discounting methods and present values.
Binomial tree model
Investment strategies: no arbitrage and risk-neutral probability
Portfolio management and Capital Asset Pricing Model
Forwards and Futures
European and American options; put-call parity
Option pricing; Black-Scholes