NMAA05113U Continuous Time Finance (FinKont)

Volume 2013/2014
Education
MSc programme in Statistics
MSc programme in Acturial Mathematics
MSc programme in Mathematics-Economics
Content

Stochastic differential equations

  • stochastic integrals
  • arbitrage
  • complet markets
  • martingale methods in finalcial mathematics
Learning Outcome
Knowledge:
Stochastic differential equation and methods applied in life insurance models.

Skills: 
At the end of the course, the students are expected to be able to

  • Apply theorems on stochastic integrals and stochastic differential equations, including theorems such as: Ito's formula, Feynman-Kac representations, martingale representations, Girsanov's theorem.
  • Determine arbitrage free prices of financial claims including determining partial differential equations for price functions.
  • Deduce if a diffusion model for the market is arbitrage free and if it is complete and to be familiar with the 1st and 2nd fundamental theorems of asset pricing including the determination of martingale measures.
  • Apply concepts for portfolios including self financing and replicating.
  • Apply the theory to determine the Black-Scholes price for a call option.

Competencies:
To provide operational qualifications and insight in modern financial methods

MI and either Fin1 or Liv. Otherwise similar
4 hours of lectures and 3 hours of exercises per week for 7 weeks.
  • Category
  • Hours
  • Exam
  • 3
  • Lectures
  • 28
  • Preparation
  • 154
  • Theory exercises
  • 21
  • Total
  • 206
Credit
7,5 ECTS
Type of assessment
Written examination, 3 hours
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Marking scale
7-point grading scale
Censorship form
No external censorship
One internal examiner.
Re-exam
30 minutes oral exam without preparationtime, with several internal examiners, 7-grade scale.
Criteria for exam assesment

The student must in a satisfactory way demonstrate that he/she has mastered the learning outcome.