640:495 Financial Mathematics
Home Page, Fall 2006

Class meets: TTH7 (5:40-8:00PM), Hill 124
Text: V. Goodman and J. Stampfli, The Mathematics of Finance: Modeling and Hedging, Brooks/Cole Series in Advanced Mathematics, first edition, 2000. ISBN 0534377769.
Prerequisites: Probability (640:477 or 960:381), Multivariable Calculus (64):251), and Linear Algebra (640:250).
Instructor: Daniel Ocone, ocone@math.rutgers.edu
Office Hours: Hill 518: Tuesday and Thursday, 3:15-4:45 ; Wednesday, 10:30-11:30; or by appointment.
Syllabus by topic: This page is a week by week outline of topics and sections of the text we want to cover.
Lecture schedule, problem sets and reading assignments, etc. Click here. This is the work horse page of the course! Go here for posted class notes, homework, lecture schedule.
Resources: This page has information on other good texts and links to web resources that the course will draw upon.
Tests, homework, grades: There will be weekly, graded problem sets, two midterms, and a final.
The final grade will be computed from an average of the final grade (200 points), the midterm grades (100 points each),
and the homework grades (100 points).

Course description

Mathematical techniques used to model and analyze financial derivatives such as options. Topics covered are hedging, arbitrage and the fundamental theorem of asset pricing; pricing options with binomial tree models; risk neutral probabilities and martingales applied to pricing; Brownian motion, geometric Brownian motion and the Black-Scholes formula; partial differential equations for pricing. As time permits, interest rate derivatives and term structure models.