Postgraduate Course: Stochastic Analysis in Finance II (MATH11077)
Course Outline
| School | School of Mathematics |
College | College of Science and Engineering |
| Course type | Standard |
Availability | Not available to visiting students |
| Credit level (Normal year taken) | SCQF Level 11 (Postgraduate) |
Credits | 7.5 |
| Home subject area | Mathematics |
Other subject area | Financial Mathematics |
| Course website |
None |
Taught in Gaelic? | No |
| Course description | This course aims to provide a good and rigorous understanding of the mathematics used in derivative pricing and to enable students to understand where the assumptions in the models break down. |
Entry Requirements (not applicable to Visiting Students)
| Pre-requisites |
|
Co-requisites | |
| Prohibited Combinations | |
Other requirements | MSc Financial Mathematics and MSc Financial Modelling and Optimization students only. |
| Additional Costs | None |
Course Delivery Information
|
| Delivery period: 2013/14 Semester 2, Not available to visiting students (SS1)
|
Learn enabled: Yes |
Quota: None |
Web Timetable |
Web Timetable |
| Course Start Date |
14/01/2014 |
| Breakdown of Learning and Teaching activities (Further Info) |
Total Hours:
75
(
Lecture Hours 30,
Summative Assessment Hours 1.5,
Programme Level Learning and Teaching Hours 2,
Directed Learning and Independent Learning Hours
42 )
|
| Additional Notes |
|
| Breakdown of Assessment Methods (Further Info) |
Written Exam
100 %,
Coursework
0 %,
Practical Exam
0 %
|
| Exam Information |
| Exam Diet |
Paper Name |
Hours:Minutes |
|
|
| Main Exam Diet S2 (April/May) | | 3:00 | | |
Summary of Intended Learning Outcomes
- be able to apply the theory of stochastic calculus to problems involving vanilla options
- understand the martingale representation theorem and its role in financial applications
- be able to apply the theory of stochastic calculus to problems involving exotic options
- conceptual understanding of the role of martingales in the theory of derivative pricing
- conceptual understanding of the role of equivalent martingale measures in financial mathematics
- conceptual understanding of the stochastic Ito integral and the connection to self-financing strategies |
Assessment Information
| See 'Breakdown of Assessment Methods' and 'Additional Notes', above. |
Special Arrangements
| MSc Financial Mathematics and MSc Financial Modelling and Optimization students only. |
Additional Information
| Academic description |
Not entered |
| Syllabus |
The Black-Scholes model, self-financing strategies, pricing and hedging options, European and American options.
Option pricing and partial differential equations; Kolmogorov equations.
Further topics: dividends, reflection principle, exotic options, options involving more than one risky asset, stochastic volatility models.
|
| Transferable skills |
Not entered |
| Reading list |
Karatzas, I. & Shreve, S. (1988). Brownian Motion and Stochastic Calculus. Springer.
Baxter, M. & Rennie, A. (1996). Financial Calculus. CUP.
Etheridge, A. (2002). A Course in Financial Calculus. CUP.
Lamberton, D. & Lapeyre, B. (1996). Introduction to Stochastic Calculus Applied to Finance. Chapman & Hall.
|
| Study Abroad |
Not Applicable. |
| Study Pattern |
Not entered |
| Keywords | SAF II |
Contacts
| Course organiser | Dr Miklos Rasonyi
Tel: (0131 6)51 7677
Email: miklos.rasonyi@ed.ac.uk |
Course secretary | Mrs Kathryn Mcphail
Tel: (0131 6)50 4885
Email: k.mcphail@ed.ac.uk |
|
© Copyright 2013 The University of Edinburgh - 10 October 2013 4:52 am
|
University Homepage