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Advanced Financial Mathematics (ACTL40004)

HonoursPoints: 12.5On Campus (Parkville)

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Overview

Availability
Semester 1
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This subject aims to provide students with grounding in advanced financial mathematics, covering option pricing under 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 and simple models for credit risk.

Intended learning outcomes

On completion of this subject, students should be able to:

  • Demonstrate a knowledge of the properties of option prices, valuation methods and hedging techniques, and be able to apply these
  • Apply binomial trees and lattices in valuing options
  • Apply the Ito calculus
  • Calculate option prices under the Black-Scholes model
  • Describe and apply in simple models, including the binomial model and the Black-Scholes model, the approach to pricing using deflators and demonstrate its equivalence to the risk-neutral pricing approach
  • Demonstrate a knowledge of models of the term structure of interest rates
  • Apply, as a computational tool, the risk-neutral approach to the pricing of zero-coupon bonds and interest-rate derivatives for a general one-factor diffusion model for the risk-free rate of interest
  • Demonstrate a knowledge of simple models for credit risk

Generic skills

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

Last updated: 6 February 2023

Eligibility and requirements

Prerequisites

For 2021 entry:

Code Name Teaching period Credit Points
ACTL30006 Intermediate Financial Mathematics
Semester 2 (On Campus - Parkville)
 12.5

From 2022 entry:

All of

Code Name Teaching period Credit Points
ACTL20003 Stochastic Techniques in Insurance
Semester 2 (On Campus - Parkville)
 12.5
ACTL30006 Intermediate Financial Mathematics
Semester 2 (On Campus - Parkville)
 12.5

Corequisites

None

Non-allowed subjects

None

Recommended background knowledge

Please refer to Prerequisites and Corequisites.

Inherent requirements (core participation requirements)

The University of Melbourne is committed to providing students with reasonable adjustments to assessment and participation under the Disability Standards for Education (2005), and the Assessment and Results Policy (MPF1326). Students are expected to meet the core participation requirements for their course. These can be viewed under Entry and Participation Requirements for the course outlines in the Handbook.

Further details on how to seek academic adjustments can be found on the Student Equity and Disability Support website: http://services.unimelb.edu.au/student-equity/home

Last updated: 6 February 2023

Assessment

DescriptionTimingPercentage

Assignment

  • 1500 words
Second half of the teaching period20%

Mid-semester Test

  • 1 hours
Second half of the teaching period10%

End-of-semester Examination

  • 2 hours
Hurdle requirement: Students must pass the final exam to pass the subject.		During the examination period70%

Last updated: 6 February 2023

Dates & times

  • Semester 1
    Principal coordinatorYuyu Chen
    Mode of deliveryOn Campus (Parkville)
    Contact hoursThree hours of lectures and/or tutorials per week
    Total time commitment170 hours
    Teaching period27 February 2023 to 28 May 2023
    Last self-enrol date10 March 2023
    Census date31 March 2023
    Last date to withdraw without fail 5 May 2023
    Assessment period ends23 June 2023

    Semester 1 contact information

    Yuyu Chen: yuyu.chen@unimelb.edu.au

Time commitment details

170 Hours

What do these dates mean

Visit this webpage to find out about these key dates, including how they impact on:

  • Your tuition fees, academic transcript and statements.
  • And for Commonwealth Supported students, your:
    - Student Learning Entitlement. This applies to all students enrolled in a Commonwealth Supported Place (CSP).
    - Completion rate. Students who started their course from 2022 and are in a CSP or receiving a HELP Loan (eg FEE-HELP) must meet the completion rate to continue to receive Commonwealth Support for that course.

Subjects withdrawn after the census date (including up to the ‘last day to withdraw without fail’) count toward the Student Learning Entitlement, and as a fail toward the completion rate, unless there are approved ‘special circumstances’.

Last updated: 6 February 2023

Further information

  • Texts

    Prescribed texts

    You will be advised of prescribed texts by your lecturer.

    Recommended texts and other resources

    Information Not Available

  • Available through the Community Access Program

    About the Community Access Program (CAP)

    This subject is available through the Community Access Program (also called Single Subject Studies) which allows you to enrol in single subjects offered by the University of Melbourne, without the commitment required to complete a whole degree.

    Entry requirements including prerequisites may apply. Please refer to the CAP applications page for further information.

  • Available to Study Abroad and/or Study Exchange Students

    This subject is available to students studying at the University from eligible overseas institutions on exchange and study abroad. Students are required to satisfy any listed requirements, such as pre- and co-requisites, for enrolment in the subject.

Last updated: 6 February 2023