Notes01 - MA3245: Financial Mathematics I Notes 1:...

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Unformatted text preview: MA3245: Financial Mathematics I Notes 1: Introduction Dr. Oliver Chen ochen@math.nus.edu.sg Department of Mathematics, National University of Singapore 1 Module details 2 Basic finance concepts 3 Summary MA3245 Notes 1: Introduction 2 / 58 Module details Schedule Lectures: Tuesday 18.00-20.00, Wednesday 12.00-14.00, both in LT21. Tutorials: Monday: 9.00-10.00 and 10.00-11.00 in S9A-0102, 13.00-14.00 and 14.00-15.00 in S16-0431. Tuesday: 9.00-10.00 and 10.00-11.00 and 17.00-18.00 in S9A-0102. Examination: 9.00, 26 April. MA3245 Notes 1: Introduction 3 / 58 Module details Contents of Module I. Basic option theory introduction to financial markets what is an option? what are options for? type of options: Puts & Calls, European & American interest rates MA3245 Notes 1: Introduction 4 / 58 Module details Contents of Module (cont.) II. Binomial tree model simple model for modeling price processes risk-neutral hedging risk-neutral option valuation MA3245 Notes 1: Introduction 5 / 58 Module details Contents of Module (cont.) III. Some stochastic tools normal distributions Wiener processes (Brownian motion) stochastic differential equations Itos lemma MA3245 Notes 1: Introduction 6 / 58 Module details Contents of Module (cont.) IV. Black-Scholes model Black-Scholes analysis Black-Scholes formula Black-Scholes equation boundary and final conditions hedging implied volatility and risk-neutral valuation MA3245 Notes 1: Introduction 7 / 58 Module details Contents of Module (cont.) V. Forward & future contracts delivery price, forward price future price comparison of forwards and futures MA3245 Notes 1: Introduction 8 / 58 Module details Recommended references (i) (main reference) Options, futures and other derivatives . John Hull, (Prentice Hall). (ii) Financial calculus: an introduction to derivative pricing . Martin Baxter and Andrew Rennie, (Cambridge University Press). (iii) The mathematics of financial derivatives: a student introduction . Paul Wilmott, Sam Howison and Jeff Dewynne, (Cambridge University Press). MA3245 Notes 1: Introduction 9 / 58 Module details Assessment 10% tutorial attendance 30% mid-term test Proposed date: 4 or 5 March 60% final examination Date: 26 April MA3245 Notes 1: Introduction 10 / 58 Module details Warning!! You will not do well in this module if you need a recipe to do math. You will need to think. There will be proofs! And next to no calculations. Should be comfortable with derivatives, integration, etc. The nature of the module is that the early going is easy and then it gets quite a bit more difficult in the later stages. Dont be lulled into a sense of comfort! MA3245 Notes 1: Introduction 11 / 58 Basic finance concepts Financial asset types Financial asset types (i) Equity securities (ii) Debt instruments (iii) Currencies (iv) Commodities (v) New asset classes (vi) Derivative securities MA3245 Notes 1: Introduction 13 / 58 Basic finance concepts Financial asset types Equity securities also called...
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This note was uploaded on 03/08/2010 for the course UNKNOWN 33 taught by Professor 11 during the Spring '10 term at National University of Health Sciences.

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Notes01 - MA3245: Financial Mathematics I Notes 1:...

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