ETC4351 - Modelling in finance and insurance

Leader: Professor Fima Klebaner and Professor Don Poskitt

Offered

Clayton First semester 2007 (Day)

Synopsis

As for ETC3510

Objectives

The learning objectives of this unit are to:

• develop an understanding of the modern approach to evaluation of uncertain future payoffs;
• develop an understanding of the the concepts of arbitrage and fair games and their relevance to finance and insurance;
• develop an understanding of concept of conditional expectation and martingales and their relation to pricing of financial derivatives;
• develop an understanding of the random processes such as Random Walk, Brownian Motion and Diffusions and be able to apply them for modelling real life processes and risk models;
• obtain skills to use Ito?s formula ;
• develop the skills to price options by using the Binomial and Black-Scholes models;
• ability to simulate the price process and obtain prices by simulation;
• ability to formulate discrete time Risk Model in Insurance and use it for control of probabilities of ruin.

Assessment

As for ETC3510 but with different examination structure

Contact hours

3 one-hour lectures and 1 one-hour tutorial/practice class per week.

Prerequisites

ETC1010 or ETC2010 and one of ETC2400, ETC2430 or ETC2480.