Winter 2011 Math 435
What, When, and Where:
Course Description:
Mathematical Finance: Introduction to financial instruments: securities, derivative securities. Portfolio and risk management. Mathematics of asset pricing: binomial model, random walks, stochastic calculus, Martingales.
Text:
Robert L. McDonald, Derivatives Markets, 2nd Edition, 912 pages.
(Available on Amazon)
Lectures:
MWF 11:00-11:50a TMCB 136
Office Hours:
MF 5:00-5:50 PM; W 10:00-10:50AM
Grading Scheme:
25% Mini-Tests (6 given, drop 1)
25% Assignments (6 given, drop 1)
25% Participation
25% Final Exam
Participation:
Participation: 25% or 250 points
Career Exploration (0-50 points each)
Investment Club Event (0-50 points each)
Movie Night (0-50 points each)
Seminars (0-50 points each)
Wall Street Journal (0-50 points each)
Interview Professionals (0-50 points each)
News and Current Events (0-50 points each)
Case Studies/Papers (0-50 points each)
Book Reports (0-50 points each)
Each activity needs a one-page professionally written summary (emailed to byumath435@gmail.com) as a Word attachment.
Course Schedule: (subject to change)
Jan 05 Course Overview; Introduction to Financial Risk and Derivatives (Read Chap 1)
Jan 07 Forwards and Options (Read Chap 2)
Jan 10 Trading Strategies for Options (Read Chap 3)
Jan 12 Risk Management (Read Chap 4)
Jan 14 Review of Chapters 1-4; Hwk #1 over Chapters 1-4
Jan 17 No School
Jan 18 - 20 Quest #1
Jan 19 Forwards and Futures (Read Chap 5)
Jan 21 Financial Forwards and Futures (Read Chap 6)
Jan 24 Movie Day
Jan 26 Commodity Forwards and Futures (Read first half Chap 7)
Jan 28 Read Swaps; Hwk #2 over Chapters 5-8
Jan 28 - Feb 01 Quest #2
Jan 31 Put/Call Parity (Read Chapter 9)
Feb 02 Binomial Option Pricing I (Read Chapter 10)
Feb 04 Binomial Options Pricing II (Read Chapter 11)
Feb 07 Pricing American Put Options with Binomial Pricing (Chapter 11)
Feb 09 More on Binomial Pricing
Feb 11 More on Binomial Pricing; Hwk #3 over Chapters 10-11
Feb 11 - Feb 15 Quest #3
Feb 14 Normal Distributions and Lognormal Distributions
Feb 16 No Class
Feb 18 The Black-Scholes Formula (Read second half Chapter 12)
Feb 22 The Greeks; Watch Film (in the evening; easy Participation Credit)
Feb 23 Heuristics
Feb 25 Exotic Options I (Chapter 14); Hwk #4 over Chapter 12
Feb 25 - Mar 01 Quest #4
Feb 28 Delta Hedging (Chapter 13)
Mar 02 Normal and Lognormal Distribution (Read Chap 18)
Mar 04 Estimating Parameters in Distrubutions
Mar 07 Monte Carlo Valuation (Read Chap 19)
Mar 09 More on Monte Carlo Valuation
Mar 11 More on Monte Carlo Valuation; Hwk #5 over Chapters 14, 18, and 19
Mar 11 - Mar 15 Quest #5
Mar 14 Brownian Motion and Ito’s Lemma (Read first third Chap 20)
Mar 16 Brownian Motion and Ito’s Lemma (Read second third Chap 20)
Mar 18 Brownian Motion and Ito’s Lemma (Read last third Chap 20)
Mar 21 The Black-Scholes Equation (Read Chap 21)
Mar 23 Exotic Options: II (Read Chap 22)
Mar 25 Volatility (Read first half of Chap 23); Hwk #6 over Chap 20-22
Mar 25 - Mar 29 Quest #6
Mar 28 Volatility (Read Chap 23)
Mar 30 Interest Rate Models (Read first half of Chap 24)
Apr 01 Interest Rate Models (Read second half of Chap 24)
Apr 04 Value at Risk (Read Chapter 25)
Apr 06 Credit Risk (Read first half of Chap 26)
Apr 08 Credit Risk (Read second half of Chap 26); Hwk #7 over Chap 23-26
Apr 08 - Apr 12 Quest #7
Apr 11 Survey of Behavioral Finance
Apr 13 Survey of Behavioral Finance
Assignments:
Chapter 2 #4-8; Chapter 3 #3-10, 14, 15; Chapter 4 #3, 4, 10, 11; Due 01/19
Chapter 5 #4, 5, 10, 11; Chapter 6 #4, 5; Chapter 7 #4, 5, 6; Due 01/31
Chapter 10 #21; Chapter 11 #4, 5, 7-9; Due 02/14
Chapter 12 #3, 6, 7, 14; Due 02/28