Postgraduate Course: Stochastic Analysis in Finance II (MATH11077)
|School||School of Mathematics
||College||College of Science and Engineering
||Availability||Not available to visiting students
|Credit level (Normal year taken)||SCQF Level 11 (Postgraduate)
|Home subject area||Mathematics
||Other subject area||Financial Mathematics
||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)
||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
|Course Start Date
|Breakdown of Learning and Teaching activities (Further Info)
Lecture Hours 30,
Summative Assessment Hours 1.5,
Programme Level Learning and Teaching Hours 2,
Directed Learning and Independent Learning Hours
|Breakdown of Assessment Methods (Further Info)
|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
|See 'Breakdown of Assessment Methods' and 'Additional Notes', above.|
|MSc Financial Mathematics and MSc Financial Modelling and Optimization students only.|
||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.
||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.
|Course organiser||Dr Miklos Rasonyi
Tel: (0131 6)51 7677
|Course secretary||Mrs Kathryn Mcphail
Tel: (0131 6)50 4885
© Copyright 2013 The University of Edinburgh - 10 October 2013 4:52 am