MAT3104 Mathematical Modelling in Financial Economics

Requisites

Pre-requisite: (MAT2100 and STA2300) or (MAT2500 and STA2300) or Students must be enrolled in the following Program: MSBN

Synopsis

This course begins by investigating models of economic activity and the financial and economic strategies which are used to stimulate economic activity. After this models of financial processes, such as equity prices, interest rates, bond yields, and so on are considered. Simulation models of such processes are developed and used in experiments using scripts written in R or scilab which are supplied on the course web page.
The theory of Stochastic differential equations is introduced and studied by simulation and in theory. Techniques for solving such equations by means of Ito's formula are explained and applied. This is applied to financial process problems and the Black-Scholes differential equation is formulated and solved. Binomial tree models are introduced and used to solve a variety of option pricing models. In the last part of the course the method for solving option pricing problems based on the equivalent martingale measure. This course is offered only in odd numbered years.

Course offers