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Nov 24, 2024
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MATH 157 - Mathematics of Financial DerivativesSemester Hours: 3
Periodically
In this course students develop the mathematical background for, and demonstrate a rigorous derivation of, the Black-Scholes equation. We discuss in detail the assumptions leading to the partial differential equation and study its solution. We also show that pricing from the Black-Scholes equation can be recovered accurately through simulations. Topics to be covered include the following: asset price random walks; the probabilistic interpretation of the Black-Scholes equation; American options as a free boundary problem; binomial method for American options; exotic and path-dependent options; interest rate models; yield curve; and bond pricing.
Prerequisite(s)/Course Notes:
MATH 137 . May not be taken on a Pass/D+/D/Fail basis.
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