Prof Konstantinos Kardaras COL 6.07

This course is compulsory on the BSc in Financial Mathematics and Statistics. This course is available as an outside option to students on other programmes where regulations permit. This course is available with permission to General Course students.

MA203 Real Analysis. Must be taken with ST202 Probability, Distribution Theory and Inference.

This course introduces the concepts of valuation, hedging and portfolio selection in a discrete-time environment. Towards the end, it introduces continuous-time markets in a heuristic fashion. It covers the following topics:

 

• The binomial model; pricing and replication.

• Trinomial model and incompleteness, arbitrage-free price intervals.

• General discrete-time models and the fundamental theorems.

• Portfolio optimization and hedging.

• Martingale theory in discrete time.

• Multi-period models and backwards induction methods.

• Passage to continuous time Black & Scholes model.

This course will be delivered through a combination of classes and lectures totalling a minimum of 30 hours across Lent Term. This year, some or all of this teaching may be delivered through a combination of virtual classes and flipped-lectures delivered as short online videos. This course includes a reading week in Week 6 of Lent Term.

Students will be expected to produce 9 problem sets in the LT.

Certain problem sets will be returned with feedback.

Lecture notes will be provided.

Exam (80%, duration: 2 hours, reading time: 15 minutes) in the summer exam period.
Coursework (20%).

Department: Statistics

Total students 2019/20: 37

Average class size 2019/20: 37

Capped 2019/20: No

Value: Half Unit