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Advanced Financial Mathematics I (ACTL40004)

HonoursPoints: 12.5On Campus (Parkville)

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Overview

Year of offer2017
Subject levelHonours
Subject codeACTL40004
Campus
Parkville
Availability
Semester 1
FeesSubject EFTSL, Level, Discipline & Census Date

The binomial model; risk-neutral pricing of derivative securities; Brownian motion; introduction to Itô΄s formula and SDEs; stochastic asset models; Black-Scholes model; arbitrage and hedging; interest-rate models; actuarial applications (e.g. maturity guarantees, SPDAs) and simple models for credit risk.

Intended learning outcomes

  • The binomial model;
  • Risk-neutral pricing of derivative securities;
  • Brownian motion;
  • Introduction to Itô's formula and SDEs;
  • Stochastic asset models;
  • Black-Scholes model;
  • Arbitrage and hedging;
  • Interest-rate models;
  • Actuarial applications (e.g. maturity guarantees, SPDAs).

Generic skills

  • High level of development: written communication; problem solving; mathematical reasoning; application of theory to practice; interpretation and analysis.

Last updated: 29 April 2017