Financial Instruments and Their Pricing

4 hours; 4 creditsDefinitions of some of the most important derivative securities traded in the financial markets: forward and futures contracts, caplets, caps, swaps, and options (Call, Put, Barrier, Bermudan, Asian, Digital, Exotic). The principles of arbitrage pricing and risk-neutral pricing, discrete-time binomial trees. The continuous time Black Scholes model and the Capital Asset Pricing model. The pricing of interest rates in an arbitrage-free framework and important interest rate models. Concentration on stochastic modeling and applications. (This course is the same as Finance 3375 [Business 3375] and Economics 3375.)Prerequisite: Mathematics 2601 and Mathematics 3501; or Mathematics 3601; or Finance 3370; or Economics 3370.

Fall, Spring

015032