A rigorous introduction to financial derivatives with applications. Topics include: binomial trees and geometric Brownian motion; European options, American options, forwards, and futures; put-call parity; the Black-Scholes-Merton pricing formula and its derivations; Delta and Gamma hedging; implied volatility; Merton jump-diffusion model; Heston model; GARCH(1,1) model. Prerequisites: Math 212 (or 222) and Math 230 (or 340) or consent of instructor.
Department of Mathematics