Math 180 - Introduction to Financial Mathematics
Syllabus:
Financial derivatives: contracts and options. Hedging and risk management. Arbitrage, interest rate, and discounted value. Geometric random walk and
Brownian motion as models of risky assets. Initial boundary value problems for the heat and related partial differential equations. Self-financing
replicating portfolio. Black-Scholes pricing of European options. Dividends. Implied volatility. Optimal stopping and American options.
Prerequisite: 53. Corequisites: 131, 151 or STATS 116.
Instructor: Valdo Durrleman
Lectures: Tuesday and Thursday 11:00am - 12:15pm, Room 380-X
Office hours: Tuesday 3-5pm, or by appointment, Room 382-K
Course Assistant: Nikolay Penev (penev "at" math.stanford.edu)
Office hours: Monday and Tuesday 7-10pm, Room 380-T
Textbooks:
(required) The Mathematics of Financial Derivatives: A Student Introduction, by Wilmott, Dewynne, and Howison (Cambridge University Press,
1995)
(optional) Options, Futures, and Other Derivatives, 5th ed, by Hull (Prentice Hall, 2003)
Outline:
Part 1. (2.5 weeks) Introduction to financial markets; forward pricing and hedging.
Part 2. (4.5 weeks) Dynamic strategies; models for financial assets; Itô's lemma; Black-Scholes equation; option pricing and hedging.
Part 3. (2 weeks) Binomial trees.
Schedule:
| 27-Sep-05 | |
18-Oct-05 | |
08-Nov-05 | HW3 due |
29-Nov-05 | HW4 due/HW5 out |
| 29-Sep-05 | Notes |
20-Oct-05 | HW2 due |
10-Nov-05 | |
01-Dec-05 | |
| 04-Oct-05 | |
25-Oct-05 | Midterm Exam |
15-Nov-05 | HW4 out |
06-Dec-05 | HW5 due |
| 06-Oct-05 | HW1 out / Notes |
27-Oct-05 | |
17-Nov-05 | |
08-Dec-05 | |
|
| 11-Oct-05 | |
01-Nov-05 | HW3 out |
22-Nov-05 | Thanksgiving recess |
15-Dec-05 | Final Exam (7pm-10pm) |
| 13-Oct-05 | HW1 due / HW 2 / Notes |
03-Nov-05 | |
24-Nov-05 | Thanksgiving recess |
Assignments:
Homeworks (25%)
Midterm (25%)
Final (50%)