AFX4180 - Mathematical finance

Leader: Professor Francis In

Offered

Clayton Second semester 2007 (Day)

Synopsis

Topics covered will be selected from: Markowitz portfolio theory, CAPM, the inter-temporal CAPM, Black-Scholes stock price and its implications, stochastic integration , stylized facts about stock and stock index returns - results from econometric and econophysics research, risky asset models which reproduce the stylized facts, option pricing under such models, Itos formula, Ito processes, Ito calculus, accumulation under stochastic rates of interest and other applications in finance, extreme value theory in stock and insurance markets.

Objectives

The learning objectives of this unit are to:

• explain advanced mathematical treatments of theoretical and analytical concepts in asset pricing and financial engineering;
• critically analyse recent advances in mathematical and computational finance including wavelet analysis, artificial neural networks and copulas;
• explain asset pricing theories and the use of scholastic processes;
• critically evaluate empirical research that applies asset pricing theories;
• apply critical thinking, problem solving and presentation skills in individual and/or group activities dealing with mathematical finance.

Assessment

Examination (3 hours): 50%
Assignment: 50%

Contact hours

Two 1.5 hour classes per week

Prerequisites

Enrolment in an honours or masters program offered by the Faculty of Business and Economics.

Prohibitions

AFC4240