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