MATHEMATICS OF FINANCIAL DERIVATIVES

Code: MA598 | L-T-P-C: 3-0-0-6

Probability, random variables, probability distributions, expectations, martingales, Brownian motion, Itôtegral, Itôformula; Financial markets and financial instruments, forward and futures contracts and determination of their prices, options, mechanism of options markets, put-call parity, European and American options, risk-neutral valuation, Cox-Ross-Rubinstein model, Black-Scholes-Merton model; Numerical methods for European and American options.

Texts:

1. P. Wilmott, S. Howison and J. Dewynne, The Mathematics of Financial Derivatives, Cambridge University Press, 1995.
2. S. Roman, Introduction to the Mathematics of Finance: From Risk Management to Options Pricing, Springer, 2004.
3. J. C. Hull, Options, Futures and Other Derivatives, 6th Edition, Prentice Hall of India/Pearson Education, 2006.

References:

1. M. Capinski and T. Zastawniak, Mathematics for Finance: An Introduction to Financial Engineering, Springer, 2005.
2. D. Higham, An Introduction to Financial Option Valuation: Mathematics, Stochastics and Computation, Cambridge University Press, 2004.