Math 53 - Schedule

Math-of-Finance Schedule
  2/6/2007        
week     topics…    
1 22-Jan M Foreign exchange:
 -- reality vs. model constructs
 -- no-arbitrage->relations among market prices
 -- financial principle of relativity 
hw1
24-Jan W Bonds, interest, present value:
 interest on accounts --
 simple, compound, continuous; D(t)
hw1 due; hw2
  26-Jan F Present value, P(t):
 discounting cash flows
   
2 29-Jan M Treasury bonds and strips;
  observing P(t) in nature
31-Jan W Yield (r-bar) and forward rates (r) hw2 due
  2-Feb F The stock market:
 downloading share prices from Yahoo
hw3  
3 5-Feb M Daily return:
 arithmetic, A(t), and logarithmic, R(t)
 statistics of historical prices
7-Feb W Standard model:
 Geometric Brownian Motion (GBM)
hw3 due
hw4
  9-Feb F Measuring the statistics of the standard model (mu and sigma).  Volatility.  Predictions from the standard model.    
4 12-Feb M Options:
  Uses of options
  Option as contingent claim
  Expected profit from option
14-Feb W Black-Scholes formula assuming risk neutrality hw4 due
  16-Feb F Applications of Black-Scholes    
5 19-Feb M Random walks
21-Feb W Decision trees ("option trees")
  23-Feb F Using option trees for American Options and Exotic Options exam about now  
6 26-Feb M Uncertain payments:
 EMV-ers, risk aversion
 utility functions
28-Feb W Fundamental theorem (utility)
  2-Mar F Fundamental theorem (utility and probability)    
7 5-Mar M Arbitrage theorem:
  no arbitrage -> market prices are expected values
7-Mar W More arbitrage theorem
  9-Mar F Uncertain future payments    
Spring Break      
8 19-Mar M OPTION PRICING (without risk neutrality):
21-Mar W   The two-branch model
  23-Mar F      
9 26-Mar M   Decision trees w/ market probabilities
28-Mar W   Black-Scholes in general
  30-Mar F   American and exotic options    
10 2-Apr M "Greeks" and financial engineering
4-Apr W
  6-Apr F   exam about now  
11 9-Apr M PORTFOLIO OPTIMIZATION:
11-Apr W   Mean-variance optimization
  13-Apr F   MVO with cash    
12 16-Apr M   Capital Asset Pricing Model
18-Apr W   Implied views
  20-Apr F      
13 23-Apr M
25-Apr W
  27-Apr F      
14 30-Apr M
2-May W
  4-May F      
December 15 - 22 : Final Exams