Financial Mathematics

3 units

This course is a self-contained introduction to financial mathematics at the undergraduate level. Topics to be covered include pricing of the financial instruments such as options, forwards, futures and their derivatives along with basic hedging techniques and portfolio optimization strategies. The emphasis is put on using of discrete, mostly binary models. The general, continuous case including the concepts of Brownian motion, stochastic integral, and stochastic differential equations, is explained from intuitive and practical point of view. Among major results discussed are the Arbitrage Theorem and Black-Scholes differential equations and their solutions.