| 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 |
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| 2 | 29-Jan | M | Treasury bonds and
strips; observing P(t) in nature |
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| 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 |
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| 7-Feb | W | Standard model: Geometric Brownian Motion (GBM) |
hw3 due hw4 |
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| 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 |
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| 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 |
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| 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 |
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| 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 | |||||