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 2019 (On-campus)
- Second semester 2019 (On-campus)
Mathematical definition of options and other financial derivatives; probability models; mathematical models of random processes; applications; numerical methods; Monte Carlo methods.
The learning goals associated with this unit are to:
- develop an understanding of the modern approach to evaluation of uncertain future payoffs
- develop an understanding of the concepts of arbitrage and fair games and their relevance to finance and insurance
- develop an understanding of the concepts 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.
Within semester assessment: 40% + Examination: 60%
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