About this course





MATH4091 - Financial Calculus

COURSE CONTENT:

Financial Calculus covers the theoretical foundations that are necessary for modelling stochastic processes in the financial world. This course builds up from the binomial asset pricing models right through to solution methods for stochastic differential equations.

Binomial pricing models are used to derive arbitrage free prices for financial options. This is achieved by an exposition of Delta hedging and Delta-Gamma hedging. Moving into the world of continuous time finance, a more realistic model for asset prices is Brownian motion, and we will undertake a semi-rigorous development of exactly what Brownian motion means.

Working with such continous time stochastic processes demands the formulation of stochastic calculus and Ito's lemma in particular. This leads us to techniques that will let us solve the stochastic differential equations which have numerous applications to finance as well as to other areas.

WHERE IS IT USED:

The topics in this course hold very strong applicability to real-world finance applications. The financial models will cover stock price models, options pricing, and even some topics in energy market models.

The stochastic calculus techniques that you learn hold relevance in other areas too: in fact Ito's calculus was developed for rocket control.

WHO IS INTERESTED:

Those interested in real-world applications of high-powered financial mathematics will need this course.

Students studying MATH4091 should consider taking the followup MATH4090 Computation in Financial Mathematics

WHAT DO I NEED:

Ideally, you will have already completed MATH3090 financial mathematics. You should have some knowledge of probability models and stochastic processes.

WHEN IS IT AVAILABLE:

MATH4091 is offered in semester 1 in all years.

CONTACT ADVICE:

The course coordinator is Professor Bevan Thompson, Room 651 of the Priestley Building. If you have any questions, comments or suggestions on the course please contact me at hbt@maths.uq.edu.au or 3365 3252, or call the Maths Department Office on 3365 3277.


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