Modelling in finance and insurance (6 points)
(BUS)
Leader: Professor Fima Klebaner and Professor Don Poskitt
Offered:
Clayton First semester 2004 (Day)
Clayton First semester 2005 (Day)
Synopsis:
Objectives: To introduce students to methods of modern probability and random processes and their use in modeling in finance and insurance. On the completion of this unit, students will: understand the modern approach to evaluation of uncertain future payoffs, understand the concepts of arbitrage and fair games and their relevance to finance and insurance; understand concept of conditional expectation and martingales and their relation to pricing of financial derivatives; underestand models of random processes and be able to apply them in modelling real life processes and risk models; be able to understand the mathematics in underlying the pricing of options by application of models such as the Binomial and Black-Scholes models; be able to write the equation for the price of the option, and be able to simulate the price process and obtain prices by simulation.
Assessment: Assignments 30%; practical work 10%; Exam 60%.
Contact Hours: 3 one-hour lectures and 1 one-hour tutorial/practice class per week.
Prerequisites: ETC1010 or ETC2010 and one of ETC2400, ETC2410, ETC2430, ETC2480, ETC3440 ETC3444 or ETC4344
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