Stochastic Calculus and the Mathematics of Finance
PROFESSOR: Laurentiu Maxim.
e-mail: laurentiu.maxim@lehman.cuny.edu
office hours: Tue, Thu 6-7:30 PM, Room G 100B.
CLASS SCHEDULE: Tue, Thu, 7:50-9:30 PM, Room G327.
CLASS HOMEPAGE:
http://comet.lehman.cuny.edu/maxim/finance.html
DESCRIPTION:
An introduction to arbitrage-based pricing of derivative securities.
Topics include: arbitrage; risk-neutral valuation; binomial trees; stochastic calculus;
the Black-Scholes formula and applications; the Black-Scholes partial differential equation.
TEXTBOOK:
Steven Shreve: Stochastic Calculus for Finance I. The binomial asset pricing model
Steven Shreve: Stochastic Calculus for Finance II. Continuous-time models.
Note: The students are advised NOT to buy the textbooks. These are more for teacher's reference. I will regularly prepare
hand-outs for registered students.
PREREQUISITE:
Calculus, linear algebra, and discrete probability. Concerning probability: students should be familiar with concepts such as expected value, variance, independence, conditional probability, the distribution of a random variable, the normal distribution. (These topics are addressed early in most undergraduate texts on probability.) .
GRADE: Homework: 25%, Midterm: 25%, Final Exam: 50%.