Basics
Office hours: Monday and Tuesday, 3:30 - 4:30 pm.
Assigned Text: `Mathematics for Finance:
An Introduction to Financial Engineering'
Marek Capinski and Tomasz Zasawniak. Second edition.
Important dates
Monday (01/11/2016) First class.
Monday (02/22/2016) First midterm
Wednesday (03/02/2016) Middle of Semester. Last day to drop a course without a grade being reported.
Monday (04/13/2016) Second midterm
Friday (04/29/2016) Last day of classes.
Thursday (05/05/2016) 12:45pm - 2:45pm, Final Exam, Location: A332 Wells Hall
This and much more on the course Syllabus as a pdf
Schedules, Course materials, etc.
Exam 1 (2/22) covers Probability review and Risk free bonds.
Quiz 1, Hmwk 1+2. Formula sheet.
Review sheet.
Exam 2 (4/13) covers CAPM, Forwards, Arbitrage introduction, option introduction, put-call parity.
Hmwk 3+4+5. Formula sheet.
Review sheet.
Exam final (5/5) covers `all material' in the class. Review homeworks and previous exams.
Review (for material not in previous exams) sheet.
`Readers digest' version of the notes.
Quizzes and Homeworks.
Quiz 1: Probability review, Jan 29 ....
probability review problems.
Homework 1: Due Feb 3. Complete Quiz 1 - Do remaining problems of the quiz which you did not complete in class.
Download Quiz 1 here.
Homework 2: Due Feb 10. Homework 2
Homework 3: Due Feb 29. Homework 3
Homework 4: Due Mar 18. Homework 4
Homework 5: Due Mar 30. Homework 5
Homework 6: Due Apr 8. Homework 6
Homework 7: Due Apr 27. Homework 7
Solutions
Probability review solutions
Quiz 1 solutions
homework 4 solutions
homework 7 solutions
Class notes
Complete probability review notes for the class - covers 5 lectures from Jan 11 - Jan 20
Lecture 1 notes - 1 lecture, Jan 22 - Simple interest, Compound interest
Lecture 2 notes - 1 lecture, Jan 25 - Annuities, Perpetuities
Lecture 3 notes - 1+ lecture, Jan 27 + 29
- Continuous interest, comparison of interest, intro to arbitrage proof
Lecture 4 notes - 1+ lecture, Jan 29 + Feb 01
- Money market - Bonds: Zero coupon and Coupon
Lecture 5 notes - 1+ lecture, Feb 01 + 03
- Securities: Return and Risk
Lecture 6 notes - 1 lecture, Feb 05
- Discrete framework
Lecture 7 notes - 1 lecture, Feb 08
- Market of 2 risky securities
Lecture 8 notes - 1+ lecture, Feb 10 + 12
- Several risky securities
Lecture 9 notes - 1 lecture, Feb 15
- Capital market line
Example sheet - extra
- MVP and CML for 3 security market
Lecture 10 notes - 1 lecture, Feb 17
- Arbitrage in system in several securities
Lecture 11 notes - 3 lectures, Feb 19 + 24 + 26
- Exchange values and pricing forward contracts
Lecture 12 notes - 1 lecture, Feb 26
- Forwards for foreign currency
Lecture 13 notes - 3 lectures, Feb 29, Mar 2 + 4
- Introduction to options: Put call parity.
Lecture 14 notes - 1 lecture, Mar 14
- Binomial model: 1 step pricing - arbitrage free measure.
Lecture 15 notes - 1 lecture, Mar 16
- Binomial model: 2 step - induction step, self financing, predictable, admissable.
Lecture 16 notes - 2 lectures, Mar 18, 21
- Binomial model, N step.
Lecture 17 notes - 1 lectures, Mar 23
- American option.
Lecture 18 notes - 1 lectures, Mar 25
- Martingale 'crash course'.
Lecture 19 notes - 1 lectures, Mar 28
- Trinomial model.
Lecture 20 notes - 2 lectures, Mar 30, Apr 4
- General securities model, second fundamental theorem of arbitrage.
Lecture 21 notes - 1 lectures, Apr 6
- scaling binomial model to continuum.
Lecture 22 notes - 1 lectures, Apr 8
- scaling replicating porfolios, Brownian motion.
Lecture 23 notes - 1+1/2 lecture, Apr 11 + 15
- Stochastic diff intro, Stochastic stock and portfolio model
Lecture 24 notes - 1/2 lecture, Apr 15
- Stochastic integration example
Lecture 25 notes - 2 lectures, Apr 18 + 20
- Feynman-Kac, Black-Scholes PDE, European Call
Lecture 26 notes - 1 lectures, Apr 22
- Greeks, European Call
Lecture 27 notes - 1 +1/2 lectures, Apr 25 + 27
- Pricing the perpetual American Put