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Description
This module aims to introduce mathematical concepts and tools used in the finance industry, in particular stochastic models and techniques used for financial modelling and derivative pricing. It is primarily intended for third and fourth year undergraduates and taught postgraduates registered on the degree programmes offered by the Department of Statistical Science (including the CSML and MASS programmes).听For these students, the academic prerequisites for this module are met either through earlier compulsory study within (UG) or successful admission to (PGT) their current programme.
Intended Learning Outcomes
- have a good understanding of how financial markets work;
- be able to describe basic financial products;
- have a good knowledge of the basic mathematical and probabilistic tools used in modern finance, including stochastic calculus;
- be able to apply the relevant techniques for the pricing of derivatives.
Applications - The techniques taught in this module are widely used throughout the modern finance industry, including the areas of trading, risk management and corporate finance. They also have applications in other areas where investment decisions are made under uncertainty, for example in the energy sector where decisions on whether or not to build (i.e. invest in) new power plants are subject to uncertainty regarding future energy demand and prices.
Indicative Content - Financial markets, products and derivatives. The time value of money. Arbitrage Pricing. The binomial pricing model. Brownian motion and continuous time modelling of asset prices. Stochastic calculus. The Black-Scholes model. Risk-neutral pricing. Extensions and further applications of the Black-Scholes framework.
Key Texts - Available from .
Module deliveries for 2024/25 academic year
Last updated
This module description was last updated on 8th April 2024.
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