Postgraduate Course: Derivative Pricing and Financial Modelling (MATH11057)
Course Outline
| School | School of Mathematics |
College | College of Science and Engineering |
| Course type | Standard |
Availability | Available to all students |
| Credit level (Normal year taken) | SCQF Level 11 (Postgraduate) |
Credits | 15 |
| Home subject area | Mathematics |
Other subject area | Financial Mathematics |
| Course website |
None |
Taught in Gaelic? | No |
| Course description | The aim of this course is to study the application of the Black-Scholes model to the range of derivative securities encountered in the market, and to the term structure of interest rates. The principle tool will be the equivalent martingale measure. Links between derivative prices and PDEs will be indicated but solution of PDEs will be covered elsewhere. Discrepancies between the Black-Scholes model and market data will be described, and alternative models presented. |
Entry Requirements (not applicable to Visiting Students)
| Pre-requisites |
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Co-requisites | |
| Prohibited Combinations | |
Other requirements | None |
| Additional Costs | None |
Information for Visiting Students
| Pre-requisites | None |
| Displayed in Visiting Students Prospectus? | Yes |
Course Delivery Information
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| Delivery period: 2012/13 Semester 2, Not available to visiting students (SS1)
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WebCT enabled: No |
Quota: None |
| Location |
Activity |
Description |
Weeks |
Monday |
Tuesday |
Wednesday |
Thursday |
Friday |
| No Classes have been defined for this Course |
| First Class |
First class information not currently available |
| No Exam Information |
Summary of Intended Learning Outcomes
On completion of this course the student should be able to:
! demonstrate an understanding of the theoretical frameworks for pricing derivatives, including the Black-Scholes model;
! demonstrate an awareness of the differences between the real-world and the risk-neutral probability measures;
! derive the underlying theory for pricing bonds and interest-rate derivatives;
! show their critical understanding of the assumptions underlying common models of asset process and interest rates;
! show a conceptual understanding of the processes in pricing derivative securities to enable the wider application of knowledge in different and new contexts;
! calculate approximate prices for European and American-style derivatives using the binomial model;
! use the Black-Scholes formula to tackle appropriate problems;
! demonstrate how to price and hedge simple equity derivatives contracts;
! demonstrate how the Greeks can be used to manage the risk in a portfolio of derivatives;
! apply the main models for the term-structure of interest rates for pricing bonds and interest-rate;
! find problem solutions in groups;
! plan and organize self-study and independent learning;
! use programming tools in the application of pricing methods;
! communicate effectively problem solutions to peers. |
Assessment Information
| Examination 67%. See course, Derivatives Markets (MATH11056). Examination takes place at Heriot-Watt University. |
Special Arrangements
| None |
Additional Information
| Academic description |
Not entered |
| Syllabus |
Not entered |
| Transferable skills |
Not entered |
| Reading list |
Not entered |
| Study Abroad |
Not entered |
| Study Pattern |
Not entered |
| Keywords | DPFM |
Contacts
| Course organiser | Dr Sotirios Sabanis
Tel: (0131 6)50 5084
Email: |
Course secretary | Mrs Kathryn Mcphail
Tel: (0131 6)50 4885
Email: |
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