Module code: MTH762P
Credits: 15.0
Semester: SEM2
Contact: Prof Alexander Gnedin
Prerequisite: Before taking this module you must take MTH771P
This module explains how we can price financial derivatives in a consistent manner, in the realistic case where the price of the underlying asset changes continuously in time. To do this, we first introduce the key ideas of stochastic calculus in a mathematically rigorous, but still accessible, way. Then, using the Black-Scholes model, we show how we can price a wide range of derivatives, using both the PDE approach and the alternative martingale approach. Finally we look at several more recent models that attempt to rectify some of the known deficiencies of the Black-Scholes model.
Connected course(s): UDF DATA
Assessment: 100.0% Examination
Level: 7
