Financial Mathematics, MATH/ECO 3900 (Winter 2021)
Department of Mathematics and Statistics
Dalhousie University

Instructor: Dr. Amjad Khan
Email: amjadkhan"at"dal.ca.

Course Description: This course is an introduction to derivative pricing. Topics include: binomial tree model, stochastic calculus, Itô calculus, Black-Scholes model, Numerical methods for PDEs, the market price of risk, log-normal models.

Course Prerequisites: MATH 2060.03 and (MATH 2120.03 or MATH 2135.03)

Learning Objectives: A student who is successful in this course should be able to:

  • Derive the process for the price of derivative security, given the process for the price of the underlying.
  • Derive the non-stochastic PDE for the price of derivative security.
  • Create an algorithm for pricing derivative security using a binomial model.
  • Compute an approximate price for derivative security using “Delta Hedging” at discrete time intervals.
  • Compute the “market price of risk” of the underlying.
    Course Materials
    Lecture notes will be available on the MATH3900 BrightSpace site for the course. The text, The Mathematics of Financial Derivatives by P. Wilmott, S. Howison & J. Dewynne; Cambridge University Press, 15th printing, 2009, is a suitable reference. MATLAB will be used for computational purpose
    Course Delivery (online)
    Lectures will be delivered Tuesdays, and Thursdays 1-2:30, synchronously, using Brightspace. Lecture notes and assignments will be posted on Brightspace (https://dal.brightspace.com/).

    Course Assessment
    The course grade will be based on assignments, a midterm, and a final exam.
    Assignments 70%
    Midterm 10%
    Final 20%
    Assignments must be submitted by the due date, through Brightspace, and as a single pdf file. The midterm examination will last one hour and will take place in class on February 11, 2021. The final examination will last three hours, will take place during the exam period, and will be scheduled by the registrar.

    Course Policies on Missed or Late Academic Requirement
    Late assignments will not be accepted unless a prior arrangement was made. Missed assignments will be given a score of zero. Assignments must be done individually and handed in before or on the due date. There are no make-up tests for missed tests. If a class is canceled (due to weather, for example) on the day when the in-class test is scheduled, the test will be rescheduled. If a class is canceled on a non-test day, the decision to make up the class will depend on circumstances. Senate has approved a new policy for missed or late academic requirements due to student absence, which came into effect Jan 1, 2018 (winter term).
    Students are not permitted to record the lectures.