ASRM 510. Financial Mathematics -- Instructor Syllabus
Textbook: Robert L. McDonald, Derivative Markets. 3rd Edition. Pearson
PART ONE INSURANCE, HEDGING, AND SIMPLE STRATEGIES (3 hours)
Chapter 2 An Introduction to Forwards and Options
Chapter 3 Insurance, Collars, and Other Strategies
Chapter 4 Introduction to Risk Management
PART TWO FORWARDS, FUTURES, AND SWAPS (3 hours)
Chapter 5 Financial Forwards and Futures
Chapter 6 Commodity Forwards and Futures
Chapter 7 Interest Rate Forwards and Futures
Chapter 8 Swaps
PART THREE OPTIONS (15 hours)
Chapter 9 Parity and Other Option Relationships
Chapter 10 Binomial Option Pricing: Basic Concepts
Chapter 11 Binomial Option Pricing: Selected Topics
Chapter 12 The Black-Scholes Formula
Chapter 13 Market-Making and Delta-Hedging
Chapter 14 Exotic Options: I
PART FIVE ADVANCED PRICING THEORY AND APPLICATIONS (20 hours)
Chapter 18 The Lognormal Distribution
Chapter 19 Monte Carlo Valuation
Chapter 20 Brownian Motion and Ito's Lemma
Chapter 21 The Black-Scholes-Merton Equation
Chapter 22 Risk-Neutral and Martingale Pricing
Chapter 23 Exotic Options: II
Chapter 25 Interest Rate and Bond Derivatives
If time permits, the following topics can be covered.
Chapter 24 Volatility
Chapter 26 Value at Risk
Chapter 27 Credit Risk
Midterm Exams (2 hours)
Total: 43 hours
Additional work required beyond the work required of undergraduates in the paired course MATH 476:
Graduate students are expected to work on more questions on assignments, midterm exams and the final exam. Graduate-only questions are expected to require more advanced and sophisticated understanding of the material.