Introduction to Mathematical Finance, Fall 2009

Course Information

Course Section: MAT487HFS LEC0101
Location: 269 North Building
Meetings: Tue 17:00 PM - 18:00 PM, Thu 16:00 PM - 18:00 PM

Instructor: Tom Alberts
E-mail: tom.alberts@utoronto.ca
Office Hours Tuesdays and Thursdays, 14:00 PM to 15:00 PM, or by appointment

Course Homepage: Here, or available through Blackboard. I encourage you to use Blackboard as you'll be able to check your grades online, and there will be a discussion board that can be used to ask questions. If you don't know how to access Blackboard please e-mail me.

Textbook (required):  "Financial Calculus: An Introduction to Derivative Pricing", Martin Baxter/Andrew Rennie.
Available in the Bookstore.
Textbook (recommended):  "Options, Futures and Other Derivatives", John Hull.

Grading Scheme

Important Dates

Topics to be Covered

This course introduces a range of mathematical concepts and techniques of mathematical finance. We will consider mostly discrete time models for the price dynamics of actively traded assets such as stocks, and develop the basic principles of risk-neutral valuation of contingent claims such as call and put options. Specific topics studied include: one-period and multi-period binomial tree models; the Black and Scholes model; self-financing replicating portfolios; martingales and conditional expectation; risk-neutral valuation in the absence of arbitrage; option deltas, gammas, vegas and other sensitivities. If time permits we will also discuss options on currencies and interest rates, and possibly describe some continuous time models for asset prices.

Students are expected to have a solid background in calculus, familiarity with matrices and basic linear algebra, and knowledge of basic discrete and continuous probability distributions. Prior experience with stochastic processes is a plus but is not necessary. No knowledge of business or finance is required, other than a basic understanding of compound interest.