Course syllabus adopted 2019-02-22 by Head of Programme (or corresponding).
Overview
- Swedish nameFinansiella derivat och partiella differentialekvationer
- CodeTMA285
- 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 20125
- Open for exchange studentsYes
Credit distribution
Module | Sp1 | Sp2 | Sp3 | Sp4 | Summer | Not Sp | Examination dates |
|---|---|---|---|---|---|---|---|
| 0101 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)
- MPENM - ENGINEERING MATHEMATICS AND COMPUTATIONAL SCIENCE, MSC PROGR, Year 1 (compulsory elective)
- MPENM - ENGINEERING MATHEMATICS AND COMPUTATIONAL SCIENCE, MSC PROGR, Year 2 (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
General entry requirements and the equivalent of the course MVE095 Options and Mathematics or in all 90 higher education credits in Mathematics and Mathematical statistics. The equivalent of the course TMS165 Stochastic Calculus is also required.
Aim
The course deals with financial derivatives using stochastic calculus and partial differential equations.
Learning outcomes (after completion of the course the student should be able to)
On successful completion of the course the student will be able to:
- master applications of martingale methods to option pricing
- explain risk-neutral pricing and market completeness
- derive the differential equation for the price of European derivatives when the underlying stock has stochastic volatility
- calibrate simple interest rate models
- compute numerically the price of European and American options
Content
Concepts from stochastic calculus reviewed in the course:
- Brownian motion, Ito's calculus, stochastic differential equations
- Change of measure, Girsanov theorem
Topics in financial derivatives pricing theory include:
- Self-financing portfolio strategies and arbitrage
- Black-Scholes' model
- Stochastic volatility models and interest rate models
- Asian options
- Forwards and futures contracts
- Financial derivatives depending on multiple stocks
Connection with partial differential equations:
- Parabolic and hypoelliptic PDEs for option prices
- Initial and boundary value problems
- Numerical computation of option prices by finite difference and finite element methods.
Organisation
Three lectures every week plus one problem session.
Literature
Calogero, S.: Introduction to stochastic calculus and financial derivatives, compendium (free available on the course homepage)
Shreve, S.: Stochastic Calculus for Finance II
Examination including compulsory elements
Written exam, and hand-ins for extra credit.
The course syllabus contains changes
- Changes to examination:
- 2021-04-14: Exam date Exam date changed by Elisabeth Eriksson
[32506, 53099, 3], New exam for academic_year 2020/2021, ordinal 3 (not discontinued course)
- 2021-04-14: Exam date Exam date changed by Elisabeth Eriksson