Synopsis for Financial Derivatives 1

Further details

(Dr Cohen- 16 lectures, Michaelmas Term)
Financial markets. Characteristic of price time series. Derivative contracts and their uses. The binomial model and option pricing. Call and put options. Risk neutrality. The Black-Scholes model, hedging and replication, option prices as solutions of a partial differential equation, and as expectations. Martingale framework. Exotic and American options.

Reading List

1. T Bjork, Arbitrage Theory in Continuous Time, OUP (1998) - available online from Oxford Scholarship Online: \longurl{http://www.oxfordscholarship.com/oso/public/index.html}
2. P Wilmott, S D Howison and J Dewynne, Mathematics of Financial Derivatives, CUP (1995) 
3. A Etheridge, A course in Financial Calculus, CUP (2002)
4. S.N. Neftci, An Introduction to the mathematics of financial derivatives, (Academic Press, 2000)