| Unit name | Financial Mathematics |
|---|---|
| Unit code | MATH35400 |
| Credit points | 20 |
| Level of study | H/6 |
| Teaching block(s) |
Teaching Block 2 (weeks 13 - 24) |
| Unit director | Professor. Johnson |
| Open unit status | Not open |
| Pre-requisites |
Level 1 Analysis, Probability and Statistics |
| Co-requisites |
None |
| School/department | School of Mathematics |
| Faculty | Faculty of Science |
In 1973 Black and Scholes solved the problem of pricing a basic financial derivative, the European call option. Since then there has been an explosion of trade in and the different types of such financial instruments. These are financial products based on an underlying asset and by making assumptions about the market it is possible to determine a unique fair arbitrage free price. This course will develop the mathematical ideas which underly the problem of pricing options. We will model stock prices as stochastic processes and develop both continuous and discrete time models for option pricing. By developing the theory of martingales we will see how to express option pricing problems mathematically and see how to calculate prices. The aim is to understand the ideas at a practical level and detailed proofs of the more technical continuous time material will be omitted.
