STAT3210 Mathematical Finance (5 cr)
Cooperation network course
Network: Vaasa Higher Education Consortium
Network: Cross-institutional studies in advanced courses in mathematics and statistics
This course is offered through the Network for Advanced Studies in Mathematics. These studies are available for the following degree students:
- Bachelor's Degree Programme in Mathematics
- Master's Degree Programme in Mathematics
- Bachelor's Degree Programme in Mathematics (Subject Teacher)
- Master's Degree Programme in Mathematics (Subject Teacher)
- Bachelor's Degree Programme in Mathematics, Chemistry or Physics Subject Teacher Education and Primary Teacher Education (Specialication in Mathematics)
- Master's Degree Programme in Mathematics, Chemistry or Physics Subject Teacher Education and Primary Teacher Education (Specialication in Mathematics)
- Doctoral Programme in Mathematics and Statistics
- Doctoral Programme in Mathematics and Science (Specialication in Mathematics)
Description
The course covers the basic mathematical theory for modeling and pricing of financial instruments in continuous time. The focus in the course is on modeling stocks and pricing of stock options in the Black Scholes model, built on geometric Brownian motion. The course also covers the theory of interests and pricing of different interest instruments. The purpose of the course is to introduce students to the stochastic techniques employed in derivative pricing.
Learning outcomes
For a passing grade, the student must be able to
i- Understand and apply probability theory, including discrete and continuous random variables.
ii- Analyze joint distributions and use properties such as expectation and variance in financial contexts.
iii- Model financial assets using stochastic processes and solve problems in financial mathematics.
iv- Apply stochastic calculus techniques such as Itô's Lemma in pricing and hedging financial derivatives.
v- solve some simple partial and stochastic differential equations.
Additional information
The Financial mathematics course is suitable as a master level course for students in engineering, fi-nance, and economics at least and also for doctoral students with some additional study assignments be-ing based on the discipline area of the student (to be agreed separately with the teacher).
Description of prerequisites
The course requires: Several Variable Calculus and Differential Equations, Probability or Probability with Applications or probability and stochastic processes.