Math 109 - Math Finance

(Fall 15)

This is a first course in Mathematical Finance sequence. This course introduces the concepts of arbitrage and risk-neutral pricing within the context of single- and multi-period financial models. Key elements of stochastic calculus such as Markov processes, martingales, filtration and stopping times will be developed within this context. Pricing by replication is studied in a multi-period binomial model. Within this model, the replicating strategies for European and American options are determined. Prerequisite: Mathematics 60 or consent of the instructor.

There will be ~12 weekly homework assignments. Homework assignments will be posted on sakai at least one week before their due date. Assignments will be due on Wednesdays in class or on Thursdays by 1pm in the box outside of my office (Adams 212). Late work will be accepted with the following reduction of points , 1-5 hours late = 10%, 5-72 hours late = 25%, and more than 72 hours late = 50%. You may discuss the homework assignment with your classmates in general terms only , but all solutions and proofs should be written up independently.

You are encouraged to ask the professor any specific questions in office hours, in class or over email.
At the end of the semester, your lowest assignment score will be dropped.