Continuous-time models, Brownian motion, stochastic integrals, Ito’s lemma. Black-Scholes-Merton market model, arbitrage and market completeness, Black-Scholes PDE, risk-neutral pricing and martingale measures. Greeks and hedging, extensions of Black-Scholes model, implied volatility, American option valuation. Vasicek and Cox-Ingersoll-Ross interest rate models Antirequisite(s): Prerequisite(s): A minimum mark of 60% in either Statistical Sciences 3520A/B (or the former Statistical Sciences 4520A/B) or Applied Mathematics 3613B and a minimum mark of 60% in Statistical Sciences 2857A/B. Corequisite(s): Pre-or Corequisite(s): Extra Information: 3 lecture hours, 0.5 course. back to top
