MATH 3120 Investment and Financial Markets II

This course covers the rational valuation of stock and currency option and the application of option "Greeks" to solve a range of problems. It also serves as an introduction to lognormal pricing, Monte-Carlo simulations, and Brownian motion. Finally, it explores the interest rate models of Vasicek, Cox-Ross-Ingersoll, and Black-Derman-Toy to model and price derivatives on bonds.

Registration Name

Investment & Financial Mkts II

Lecture Hours

3

Lab Hours

0

Credits

3

Prerequisite

MATH 3110

Offered

Athens: Spring as needed

Student Learning Outcomes

• Use the Black-Scholes-Merton (BSM) mdel to price European options on stocks, currency, and futures
• Describe, compute, and apply option "Greeks" to explain and model differential behavior in option prices
• Apply "Greeks" to understand options elasticity, volatility, risk-premiums, and the Sharpe ratio
• Compute implied volatility from the BSM model
• Apply "Greeks" to Δ- and Δ- Γ hedge asset portfolios containing one or more options
• Use lognormal models to represent the price of stocks over time and compute option payoff probabilites
• Use Monte Carlo methods to simulate lognormal stock prices and approximate the price of vanilla dn exotic options
• Explain the role of Brownian motion in modeling asset and option prices
• Use the Vašíček, Cox-Ross-Ingersoll, and Black-Derman-Toy models to understand and price options on bonds & interest rates
• Solve a wide variety of IFM/3f exam questions, as administered by SOA/CAS.