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Undergraduate Study

MATH3075/3975 Financial Mathematics

General Information

This page contains information on the Senior mainstream Unit of Study MATH3075 Financial Mathematics and the Senior advanced Unit of Study MATH3975 Financial Mathematics (advanced). Note that MATH3075 and MATH3975 share the same classes.

  • Taught in Semester 2.
  • Credit point value: 6.
  • Classes per week: Three lectures and one tutorial.
  • Lecturer(s): Marek Rutkowski .

Please refer to the Senior Mathematics and Statistics Handbook for all questions relating to Senior Mathematics and Statistics. In particular, see the MATH3075/3975 handbook entry for further information relating to MATH3075 and MATH3975.

You may also view the description of MATH3075 and the description of MATH3975 in the central units of study database.

Outline

  • The aim of the course MATH3075/3975 is to give an introduction to the mathematical theory of modern financial markets with the emphasis on pricing and hedging of derivative securities. Topics covered by this course include: probability review, introduction to securities markets, the modelling of riskless and risky securities, the concept of arbitrage, the risk-neutral probabilities (equivalent martingale measures) and their applications, the fundamental theorem of asset pricing, the study of complete and incomplete market models, the pricing and hedging of options of European and American style, the put-call parity relationship, the binomial options pricing model and the CRR call option pricing formula, the Brownian motion, the Black-Scholes model and the derivation of the Black-Scholes call option pricing formula.
  • Students enrolled in MATH3975 will also be required to get familiar with proofs of all results, including the Fundamental Theorem of Asset Pricing. In addition, they should understand the concept of a martingale and be able to examine the basic properties of martingales, as well as to analyse Markov and martingale properties of the (geometric) Brownian motion.

Lectures

  • Lectures in the normal unit MATH3075 will be held concurrently with those of the corresponding advanced unit MATH3975.
  • It is highly recommended that you read the relevant part of the course notes before each lecture.

Course Notes and Slides

Download lecture notes and slides (PDF files) here:

Tutorial Problems and Solutions

Download tutorial problems and solutions (PDF files) here:

Equity Options (NYSE)

DJIA Options (CBOE)

Nasdaq 100 Options (NYSE)

Crude Oil Futures and Options (NYMEX)

Further readings (not compulsory):

Consultations during the study week

Marek Rutkowski is on leave from 26 October till 12 November.

Unit Assessments: Semester 2, 2016

Assessment tasks for MATH3075 and MATH3975 are as follows:

Check your marks

MATH3075 students: please check that your marks for Assignment (Quiz) 1 and Assignment (Quiz) 2 have been recorded correctly by pressing the "Check marks" button.

Please note that any corrections to Assignment (Quiz) 1 marks must be made by Friday, Sep 30.
Please note that any corrections to Assignment (Quiz) 2 marks must be made by Friday, Nov 04.

Check your marks

MATH3975 students: please check that your marks for Assignment (Quiz) 1 and Assignment (Quiz) 2 have been recorded correctly by pressing the "Check marks" button.

Please note that any corrections to Assignment (Quiz) 1 marks must be made by Friday, Sep 30.
Please note that any corrections to Assignment (Quiz) 2 marks must be made by Friday, Nov 04.

Timetable

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