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2020/21 Taught Postgraduate Module Catalogue

MATH5330M Continuous Time Finance

15 creditsClass Size: 1

Module manager: Dr Miryana Grigorova
Email: TBC

Taught: 1 May to 30 Sep View Timetable

Year running 2020/21

Pre-requisite qualifications

MATH5320M

This module is mutually exclusive with

MATH3733Stochastic Financial Modelling

This module is not approved as an Elective

Objectives

This module develops a general methodology for the pricing of financial assets in risky financial markets based on
continuous-time models.

On completion of this module, students will be able to:
- demonstrate an understanding of continuous-time stochastic processes
- interpret a stochastic differential equation and its solution
- understand the log-normal asset pricing model
- apply Ito's formula
- derive the Black-Scholes formula
- understand the arbitrage principle and its application to securities pricing
- explain state prices and the concept of equivalent martingale measures
- show an understanding of term-structure models

Syllabus

Prices of financial securities are often adequately described by continuous-time stochastic processes derived from a Brownian motion. This module will cover the fundamental continuous-time models of financial markets and the necessary mathematical tools for their analysis. The students will learn to apply stochastic calculus for pricing securities such as options
and interest rate derivatives in arbitrage-free markets.

This module is devoted to continuous-time stochastic processes, stochastic differential equations, Ito's formula, Black-Scholes formula, principle of arbitrage in continuous-time models, state prices, equivalent martingale measures and term-structure (interest rate) models.

On completion of this module the student will be familiar with the basic theory, tools and terminology of continuous-time financial mathematics and will be able to apply the models and techniques to analyse real world situations.

Teaching methods

Delivery typeNumberLength hoursStudent hours
Lecture111.0011.00
Seminar111.0011.00
Private study hours128.00
Total Contact hours22.00
Total hours (100hr per 10 credits)150.00

Private study

- 6 hours per lecture: 60 hours
- 4 hours per tutorial: 40 hours
- Preparation for assessment: 20 hours

Opportunities for Formative Feedback

Progress will be monitored by contributions made to tutorials; and there will be an informal test in about week 5.

Methods of assessment


Exams
Exam typeExam duration% of formal assessment
Open Book exam3 hr 00 mins100.00
Total percentage (Assessment Exams)100.00

The resit for this module will be 100% by 3 hours examination

Reading list

The reading list is available from the Library website

Last updated: 13/11/2020 16:37:09

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