Financial Mathematics 2

Module code: MA7072

This module together with Financial Mathematics 1 will develop probabilistic tools to enable investors to value financial derivatives. It covers continuous time theory of financial derivatives pricing (Black-Merton-Scholes model, European and American options, stock and option prices, exotic options, swaps) based on stochastic calculus (Ito integrals, stochastic differential equations, Ito’s formula, Kolmogorov’s equations, Girsanov’s transformation). 

Topics covered

  • Interest rate modelling and fixed income securities
  • Financial risks
  • Greeks
  • Risk management
  • Basics of portfolio insurance risks

Learning

  • 33 hours of lectures
  • 11 hours of seminars

Assessment

  • Exam, three hours (100%)

Pre-Requisites

MA7071 - Financial Mathematics I