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