Mathematical Modeling and its Application in Finance

1 Course Unit

Quantitative methods have become fundamental tools in the analysis and planning of financial operations. There are many reasons for this development: the emergence of a whole range of new complex financial instruments, innovations in securitization, the increased globalization of the financial markets, the proliferation of information technology and the rise of high-frequency traders, etc. In this course, models for hedging, asset allocation, and multi-period portfolio planning are developed, implemented, and tested. In addition, pricing models for options, bonds, mortgage-backed securities, and other derivatives are studied. The models typically require the tools of statistics, optimization, and/or simulation, and they are implemented in spreadsheets or a high-level modeling environment, MATLAB. This course is quantitative and will require extensive computer use. The course is intended for students who have strong interest in finance. The objective is to provide students the necessary practical tools they will require should they choose to join the financial services industry, particularly in roles such as: derivatives, quantitative trading, portfolio management, structuring, financial engineering, risk management, etc. Prospective students should be comfortable with quantitative methods, such as basic statistics and the methodologies (mathematical programming and simulation) taught in OIDD 612 Business Analytics or OIDD 321 Management Science (or equivalent). Students should seek permission from the instructor if the background requirements are not met. Fall or Spring Mutually Exclusive: OIDD 3530 Prerequisite: OIDD 3210 OR OIDD 6120 0.5,1 Course Unit