units

ETC5351

Faculty of Business and Economics

18 September 2017 26 December 2024

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This unit entry is for students who completed this unit in 2016 only. For students planning to study the unit, please refer to the unit indexes in the the current edition of the Handbook. If you have any queries contact the managing faculty for your course or area of study.

Monash University

6 points, SCA Band 2, 0.125 EFTSL

Postgraduate - Unit

Refer to the specific census and withdrawal dates for the semester(s) in which this unit is offered.

Faculty

Business and Economics

Organisational Unit

Department of Econometrics and Business Statistics

Coordinator(s)

Professor Fima Klebaner and Professor Don Poskitt

Offered

Clayton

  • First semester 2016 (Day)

Synopsis

Mathematical definition of options and other financial derivatives; probability models; mathematical models of random processes; applications; numerical methods; Monte Carlo methods.

Outcomes

The learning goals associated with this unit are to:

  1. develop an understanding of the modern approach to evaluation of uncertain future payoffs
  2. develop an understanding of the concepts of arbitrage and fair games and their relevance to finance and insurance
  3. develop an understanding of the concepts of conditional expectation and martingales and their relation to pricing of financial derivatives
  4. 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
  5. obtain skills to use Ito's formula
  6. develop the skills to price options by using the Binomial and Black-Scholes models
  7. ability to simulate the price process and obtain prices by simulation
  8. ability to formulate discrete time Risk Model in Insurance and use it for control of probabilities of ruin.

Assessment

Within semester assessment: 40%
Examination: 60%

Workload requirements

Minimum total expected workload to achieve the learning outcomes for this unit is 144 hours per semester typically comprising a mixture of scheduled learning activities and independent study. Independent study may include associated readings, assessment and preparation for scheduled activities. The unit requires on average three/four hours of scheduled activities per week. Scheduled activities may include a combination of teacher directed learning, peer directed learning and online engagement.

See also Unit timetable information

Chief examiner(s)

Professor Fima Klebaner

Prerequisites

ETC2520 or ETC2440 or equivalent.