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| Undergraduate, Postgraduate |
(BUS)
|
Leader: Associate Professor Roger Gay
Offered:
Clayton Second semester 2005 (Day)
Synopsis: Topics covered will be selected from: Markowitz portfolio theory, CAPM, asset pricing methodologies, accumulation under stochastic rates of interest, hedging in interest rate and share markets, risk-neutral valuation, binomial option pricing model, Black-Scholes option price, equivalent martingale measures, stochastic integration and the interpretation of a stochastic integral, need for Ito's integral in option pricing, stochastic exponential models of the share price, consequences for portfolio theory and the CAPM, the inter-temporal CAPM, Ito's formula, Ito processes, Ito calculus, integration by parts and applications to financial modelling.
Assessment: Examination (3 hours): 50% + Assignment: 50%
Contact Hours: Two 1.5 hour classes per week