NMAK15010U Continuous Time Finance 2: (FinKont2)
MSc Programme in Mathematics-Economics
See "Knowledge" below. Note that the "selected topics" part (weeks 4-9) varies from year to year.
- Confidence in using continuous-time finance models to analyze problems and models that go (well) beyond the basic “call-option in Black/Scholes”-case. The confidence is obtained by working through (fairly) specific specific examples (see also 2. below) rather than “abstract nonsense”.
- Producing “sensible numbers” from the continuous-time models; the numbers may arise from implementation of specific numerical algorithms, from well-designed experiments, or from empirical analysis.
- Ability to read original research papers in finance journals, both broad academic journals such as Journal of Finance, technical journals such as Mathematical Finance, or applied quantitative journals such as Journal of Derivatives.
- Design, conduct and analyze simulation-based hedge experiments
- Derive no-arbitrage conditions models with dividends, multiple currencies, stochastic interest rates, or a non-traded underlying asset.
- Use change-of-numeraire techniques to price interest rate options
These are the skills acquired in first, part of the course (3 weeks). The second part the course (whose topics will vary slightly from year to year depending on lecturer and student interests) will hone these skills further as well as teach some other ones (e.g. how an how not to read an academic paper).
- Dynamic hedging, model risk and "the fundamental theorem of derivative trading"
- Dividends and foreign exchange models
- Arbitrage-free term structure models; the Heath-Jarrow-Morton formalism; 1-dim. affine models; Vasicek and Cox-Ingersoll-Ross; LIBOR market models
- Pricing of interest rate derivatives (caps, swaptions)
- Selected topics such as advanced models for option pricing (stochastic volatility, jumps) or multi-dimensional affine term structure models.
Academic qualifications equivalent to a BSc degree is recommended.
- Theory exercises
- 7,5 ECTS
- Type of assessment
- Continuous assessment
- Type of assessment details
- The evaluation is based on 3 mandatory hand-in exercises, which all have equal weight.
- All aids allowed
- Marking scale
- 7-point grading scale
- Censorship form
- No external censorship
One internal examiner
20 minute oral exam with several internal examiners. No preparation time and no aids.
Criteria for exam assesment
The student must in a satisfactory way demonstrate that he/she has mastered the learning outcome of the course.
- Course code
- 7,5 ECTS
- Full Degree Master
- 1 block
- Block 3
- Course capacity
- No limit
The number of seats may be reduced in the late registration period
- Study Board of Mathematics and Computer Science
- Department of Mathematical Sciences
- Faculty of Science
- Rolf Poulsen (4-83807d77517e7285793f7c863f757c)