FINM3003 - School of Finance and Applied Statistics Continuous Time Finance(FINM3003/7003 1st Semester 2009 Lectures

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School of Finance and Applied Statistics Continuous Time Finance (FINM3003/7003) 1 st Semester 2009 Lectures Times: ( http://timetable.anu.edu.au ) Lecture A: Monday, 11:00 AM - 12:00 PM; COP T (Building 25) Lecture B: Tuesday, 11:00 AM - 12:00 PM; COP G030 (Building 24) Lecture C: Thursday, 11:00 AM – 12:00 PM; COP G030 (Building 24) Workshops Wednesday, 10:00 AM – 11:00 AM; COP T (Building 25) (Workshops are held fortnightly; starting week 2) Lecturer Dr. David Heath Office Location: Room 2014, PAP Moran Building email: [email protected] Telephone: 02 61250401(w) Prerequisites The unit prerequisites are Financial Instruments and Risk Management (FINM2002) AND Stochastic Modelling (STAT3004) Generally, the course cannot be undertaken unless you have completed both of the above units. Exceptions need the approval of the Head of the School of Finance and Applied Statistics. For 2009 only, the Head of School has approved a transitional arrangement related to the new prerequisite so that students will be permitted to concurrently enrol in STAT3004 and FINM3003 if they have not already completed STAT3004. Course Outline This course provides an introduction to the theory and practice of derivative pricing and hedging with emphasis on the application of continuous time stochastic processes. The course is divided into three main sections. In the first section background material on markets, forward and futures contracts, and concepts related to hedging, speculation and arbitrage are presented. The difference between forward and futures contracts is explained and how these securities are priced. Treasury bills and bonds are discussed as well as interest rate products and futures. Options markets are outlined together with trading strategies that involve options. Upper and lower bounds for option prices and put-call parity are described. In the second section the mathematical machinery needed for the risk-neutral
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This note was uploaded on 03/13/2010 for the course STATISTIC 472 taught by Professor Amjad during the Spring '08 term at Yarmouk University.

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FINM3003 - School of Finance and Applied Statistics Continuous Time Finance(FINM3003/7003 1st Semester 2009 Lectures

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