Course syllabus adopted 2021-02-12 by Head of Programme (or corresponding).
Overview
- Swedish nameOptioner och matematik
- CodeMVE095
- Credits7.5 Credits
- OwnerMPENM
- Education cycleSecond-cycle
- Main field of studyMathematics
- DepartmentMATHEMATICAL SCIENCES
- GradingTH - Pass with distinction (5), Pass with credit (4), Pass (3), Fail
Course round 1
- Teaching language English
- Application code 20132
- Open for exchange studentsYes
Credit distribution
Module | Sp1 | Sp2 | Sp3 | Sp4 | Summer | Not Sp | Examination dates |
|---|---|---|---|---|---|---|---|
| 0106 Examination 7.5 c Grading: TH | 7.5 c |
|
In programmes
- MPCAS - COMPLEX ADAPTIVE SYSTEMS, MSC PROGR, Year 1 (compulsory elective)
- MPCAS - COMPLEX ADAPTIVE SYSTEMS, MSC PROGR, Year 2 (elective)
- MPDSC - DATA SCIENCE AND AI, MSC PROGR, Year 1 (compulsory elective)
- MPDSC - DATA SCIENCE AND AI, MSC PROGR, Year 2 (elective)
- MPENM - ENGINEERING MATHEMATICS AND COMPUTATIONAL SCIENCE, MSC PROGR, Year 1 (compulsory elective)
- MPENM - ENGINEERING MATHEMATICS AND COMPUTATIONAL SCIENCE, MSC PROGR, Year 2 (elective)
- TKIEK - INDUSTRIAL ENGINEERING AND MANAGEMENT - Financial mathematics, Year 2 (compulsory)
- TKITE - SOFTWARE ENGINEERING, Year 3 (elective)
- TKTEM - ENGINEERING MATHEMATICS, Year 3 (elective)
Examiner
Simone Calogero- Professor, Analysis and Probability Theory, Mathematical Sciences
Eligibility
General entry requirements for Master's level (second cycle)Applicants enrolled in a programme at Chalmers where the course is included in the study programme are exempted from fulfilling the requirements above.
Specific entry requirements
English 6 (or by other approved means with the equivalent proficiency level)Applicants enrolled in a programme at Chalmers where the course is included in the study programme are exempted from fulfilling the requirements above.
Course specific prerequisites
One variable calculus, linear algebra, probability theory/statistics.
Aim
The course deals with the options pricing theory within the binomial model and the Black-Scholes model.
Learning outcomes (after completion of the course the student should be able to)
(a) Describe financial derivatives of European, American and Asian type
(b) Explain the concept of arbitrage
(c) Describe algorithms for pricing and hedging financial derivatives in the binomial model
(d) Compute numerically the price of American and European options in the binomial model
(e) Derive the Black-Scholes model as limit of the binomial model
(f) Compute the Black-Scholes price of European options
(g) Use the Monte Carlo method to compute the Black-Scholes price of Asian options
(h) Compute the Black-Scholes price of European options when the underlying stock pays a dividend
(i) Derive the value of coupon bonds in the Vasicek interest rate model
Content
The Arbitrage-free Principle. Binomial model. Self-Financing Portfolios. Probability theory and Brownian Motion. Black-Scholes Model. Black-Scholes formula. Call and Put options. Exotic Options. Monte Carlo method. Dividends. Coupon bonds. Yield curve
Organisation
The course comprises approximately 50 lecture hours.
Literature
Calogero, S.: A first course in options pricing theory, compendium (freely available online at the course homepage)
Examination including compulsory elements
Assignments. Written examination.
The course examiner may assess individual students in other ways than what is stated above if there are special reasons for doing so, for example if a student has a decision from Chalmers on educational support due to disability.
The course syllabus contains changes
- Changes to examination:
- 2022-04-23: Exam date Exam date changed by Elisabeth Eriksson
[34665, 55214, 3], New exam for academic_year 2021/2022, ordinal 3 (not discontinued course) - 2021-11-04: Exam date Exam date changed by Elisabeth Eriksson
[34665, 55214, 2], New exam for academic_year 2021/2022, ordinal 2 (not discontinued course)
- 2022-04-23: Exam date Exam date changed by Elisabeth Eriksson