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M4192 Mathematics of finance: Option pricing

Syllabus: The pricing of options in the binomial model. The Black-Scholes pricing formula. Basic methods in probability theory including conditioning. Introduction to stochastic processes. The Brownian motion. Introduction to stochastic calculus. Continuous martingales. Ito's lemma. Stochastic differential equations and diffusions. The Black-Scholes model. Relations to partial differential equations.

Prerequisites: An understanding of the basics of the theory of probability would be an advantage, but will not be assumed.

References:
Hull, John, Options, futures and other derivative securities, Prentice Hall
Klebaner, Fima, Introduction to stochastic calculus with applications, Imperial College Press

Lecturer: Fima Klebaner

Teaching materials



 
For current students