Course Number
625.642
Next Offered
Spring 2024
Primary Program
Applied and Computational Mathematics
Location
Online
Course Format
Virtual Live

The concept of options stems from the inherent human desire and need to reduce risks. This course starts with a rigorous mathematical treatment of options pricing, and related areas by developing a powerful mathematical tool known as Ito calculus. We introduce and use the well-known field of stochastic differential equations to develop various techniques as needed, as well as discuss the theory of martingales. The mathematics will be applied to the arbitrage pricing of financial derivatives, which is the main topic of the course. We treat the Black-Scholes theory in detail and use it to understand how to price various options and other quantitative financial instruments. Topics covered in the course include options strategies, binomial pricing, Weiner processes and Ito’s lemma, the Black-Scholes-Merton Model, futures options and Black’s Model, option Greeks, numerical procedures for pricing options, the volatility smile, the value at risk, exotic options, martingales and risk measures. Course Note(s): This class is distinguished from EN.625.641 Mathematics of Finance: Investment Science (formerly 625.439) and EN.625.714 Introductory Stochastic Differential Equations with Applications, as follows: EN.625.641 Mathematics of Finance: Investment Science gives a broader and more general treatment of financial mathematics, and EN.625.714 Introductory Stochastic Differential Equations with Applications provides a deeper (more advanced) mathematical understanding of stochastic differential equations, with applications in both finance and non-finance areas.

Course Prerequisite(s)

Multivariate calculus, linear algebra and matrix theory (e.g., EN.625.609 Matrix Theory), and a graduate-level course in probability and statistics (such as EN.625.603 Statistical Methods and Data Analysis).

Course Offerings

Open
First Time Online

Mathematics of Risk, Options, and Financial Derivatives

625.642.8VL
01/25/2024 - 05/02/2024
Thur 7:20 p.m. - 10:00 p.m.
Notes: This course uses the Virtual Live format. All students participate online through live web-conferencing at the scheduled day and time. This is a live-online course in which students participate in live weekly lectures and discussions, and are able to interact extensively with the instructors. All classes are recorded for download and review.
Semester
Spring 2024
Course Format
Virtual Live
Location
Online
Cost
$5,090.00
Course Materials