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Topics include: probability concepts; martingales in actuarial studies and finance; applications of Brownian motion, geometric Brownian motion and the lognormal distribution; stochastic calculus; models for financial time series; applications of Monte Carlo simulation in insurance and finance.
Intended learning outcomes
- Have an understanding of some probability concepts to solve problems using sigma-algebras, probability measures, random variables, distributions and expectations of random variables;
- Describe conditional expectations and apply their properties to simplify calculations;
- Construct and apply martingales in solving problems in insurance and finance;
- Gain basic knowledge of Brownian motion and geometric Brownian motion.
- Perform calculations with stochastic integrals and Ito's formula.
High level of development: written communication; problem solving; statistical reasoning; application of theory to practice; synthesis of data and other information.
Last updated: 16 June 2020