Syllabus
|
Course Code: MMATH21-313 Course Name: Elective - III ) Financial Mathematics |
||
| MODULE NO / UNIT | COURSE SYLLABUS CONTENTS OF MODULE | NOTES |
|---|---|---|
| 1 | Fundamentals of Financial Mathematics: Financial Markets, derivatives; Payoff functions, Options, Types of traders Asset Price Models: Discrete/continuous models and their solutions; Random walks; The Brownian motion; Ito’s formula; Simulation of asset price model; Hypothesis of no-arbitrage-opportunities; Basic properties of option prices | |
| 2 | Black-Scholes Analysis: The Black-Scholes Equation; Exact solution for European options; Risk Neutrality; The delta hedging; Trading strategy involving options. Variations on Black-Scholes models: Options on dividend-paying assets; Warrants; Futures and futures options |
|
| 3 | Numerical Methods (Solving B.S equation): Monte Carlo method; Binomial Methods; Finite difference methods; Fast algorithms for solving linear systems; American Option: free boundary value problem; linear complementary problem; fixed domain problem; Projective/implicit method for American put/call |
|
| 4 | Exotic Options: Binaries; Compounds; Chooser options; Barrier option; Asian/lookback options; Path-Dependent Options: Average strike options; Lookback Option Bonds and Interest Rate Derivatives: Bond Models; Interest models; Convertible Bonds Stochastic calculus: Brownian motion; Stochastic integral; Stochastic differential equation; Diffusion process |
|
