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.
- First semester 2017 (Day)
Variations and quadratic variation of functions. Review of integration and probability. Brownian motion. Ito integrals and Ito's formula. Stochastic differential equations and diffusions. Calculation of expectations and PDE's, Feynman-Kac formula. Martingales and semimartingales. Change of probability measure and Girsanov theorem. Fundamental theorems of asset pricing. Change of numeraire. Application to options.
On completion of this unit students will be able to:
- Develop specialised mathematical knowledge and skills within the field of stochastic calculus.
- Understand the complex connections between financial and probabilistic concepts.
- Apply sophisticated stochastic modelling skills within the context of financial markets.
- Apply critical thinking to problems in stochastic calculus and financial mathematics.
- Apply problem solving skills within the finance context.
- Formulate expert solutions to practical financial problems using specialised cognitive and technical skills within the field of stochastic calculus.
- Communicate complex information in an accessible format to a non-mathematical audience.
Weekly homework: 10% + Assignments: 10% + Minor project: 10% + Examination: 70%
Two 1.5-hour lectures and one 1-hour tutorial per week
See also Unit timetable information
Only students enrolled in the Master of Financial Mathematics can enrol in this unit. Exceptions can be made with permission from the unit co-ordinator.