|Year of offer||2019|
|Fees||Subject 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).
High level of development: written communication; problem solving; mathematical reasoning; application of theory to practice; interpretation and analysis.