MA670
Financial Modelling and Derivative Pricing in Continuous Time
0.5 Credit

This course develops the mathematical framework for option pricing in continuous time for equity and interest rate derivatives. Topics include: asset pricing and interest rate processes; derivation of the Black-Scholes partial differential equation; pricing of standard European, American and multi-asset options under geometric Brownian motions; stochastic asset price models; multi-factor interest rate stochastic modelling; bond pricing and interest rate option pricing and calibration; and path dependent options. Topics may include: transformation techniques for solving parabolic PDEs; Green's functions; path integral methodologies for pricing and hedging options; Monte Carlo simulation and stochastic mesh methods for pricing complex multi-asset derivatives.