Math 435: Mathematical Finance

From MathWiki
Revision as of 15:45, 15 July 2010 by Cpg (Talk | contribs) (Minimal learning outcomes)

Jump to: navigation, search

Catalog Information


Mathematical Finance.

(Credit Hours:Lecture Hours:Lab Hours)





Math 431.


The binomial asset pricing model (discrete probability). Martingales, pricing of derivative securities, random walk in financial models, random interest rates.

Desired Learning Outcomes

The minimal expectation for this course is that students learn about mathematical finance in the context of discrete time and finite state-spaces. It is therefore not required that students be taught about Brownian motion, the Black-Scholes model, etc.


Students should have had an introductory course in probability.

Minimal learning outcomes

Within the context mentioned above, students should be able to compute prices for derivative securities. They should be conversant with the standard terminology of mathematical finance and be able to use this terminology correctly in answering questions. At a minimum, students should understand the following concepts in the context of binomial decision trees:

  1. Martingales
  2. Markov processes
  3. Arbitrage
  4. Risk neutrality
  5. State prices

  6. Options
    • Call and put
    • American and European
  7. Stopping times
  8. Simple random walks
  9. Interest rate models

Additional topics

Courses for which this course is prerequisite