Mar 29, 2024  
2017-2018 Undergraduate Bulletin 
    
2017-2018 Undergraduate Bulletin [ARCHIVED BULLETIN]

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MATH 157 - Mathematics of Financial Derivatives

Semester 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. This course, along with MATH 095 , will be especially useful for students planning to take the Society of Actuaries’ Exam FM and Casualty Actuarial Society’s Exam 2

Prerequisite(s)/Course Notes:
MATH 137 . May not be taken on a Pass/D+/D/Fail basis.





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