This page will record the topics we cover, with links to problem sets and handouts. Please read the relevant sections of the course text by Stampfli and Goodman before the lecture in which it is discussed. Reserve reading is strongly suggested.
Lecture  Topics  Reading  Assignments 

1, 9/5  Financial Markets and derivatives; Introduction to binomial models One bond/onestock model; Forward contracts 
Text: 1.11.3, 1.6 Reserve: Hull, Chapter 1 Lecture 1 outline(pdf file) Corrections to lecture 1 outline 
Problems 
2, 9/7  No arbitrage pricing of forward contracts;
no arbitrage in the oneperiod model 
Text: 1.2,1.3, 2.1 Reserve, Hull, pp. 99109 Lecture 2 outline(pdf file) 
Problems 
3, 9/12  More on noarbitrage pricing of forward contracts and in oneperiod models  Read Lecture 2 outline(pdf file)
before coming to class! 

4, 9/14  Replicating portfolio principle; Valuing forward contracts, putcall parity; pricing derivatives in the oneperiod binomial model  Text: Chapter 2  Problems for lectures 3,4 
5, 9/19  The one period binomial model; riskneutral measure and the fundamental theorem of asset pricing, I. 
Text, Chapter 2 and Lectures 45 notes.  
6, 9/21  The risk neutral measure and pricing by expectation  Class notes  
7, 9/26;  Introduction to multiperiod binomial trees  Text, sections 3.1, 3.2, 3.3 Reserve reading, Hull, Chapter 11. 
Problems 
8, 9/28  Multiperiod tree models continued  Text, 3.4, 3.5, and class notes
Lecture 8 notes Hull, Chapter 11. 

9, 10/3  Expectation and the riskneutral measure  Class notessee lecture 8  
10, 10/5  Conditional expectation  Class notes  
11, 10/10  Recitation lecture  
12, 10/12  Pricing by conditional expectations, portfolio processes no arbitrage in binomial tree model 
Class notes to appear  
13, 10/17  FIRST MIDTERM, IN CLASS!  
14, 10/19  Conditional expectations and applications to pricing  Class notes  
15, 10/24  Conditional expectations, pricing and martingales  Lecture Notes  
16, 10/26  Martingales and portfolios  
17, 10/31  Portfolio replication Central Limit Theorem 
Notes on portfolio
replication Notes on normal r.v.'s and the Central Limit Theorem 
See problems page for homework due on 11/2 
18, 11/2  Brownian motion  Class Notes on Brownian motion  
19, 11/7  Brownian motion and the BlackScholes model  
20, 11/9  Brownian motion and the BlackScholes model  Chapter 4, Models, pricing and BlackScholes pricing  
21, 11/14  The BlackScholes model  Chapter 5  
22, 11/16  BlackScoles, estimating parameters, calculating prices, deriving the BlackScholes formula  Chapter 5, Lecture notes on binomial tree approximation  
23, 11/21  BlackScoles, continued  
24, 11/28  Midterm II  
25, 11/30  Ito calculus introduction  Chapter 6, Class notes; Intro to Ito calculus  
26, 12/5  The BlackScholes pde, hedging, and the greeks  Chapters 6 and 7, Ito calculus and BlackScholes  
27, 12/7  The BlackScholes pde, hedging, and the greeks, continued  Chapters 6 and 7, Portfolio analysis with the greeks  
28, 12/12  The BlackScholes pde, hedging, and the greeks, continued  Chapters 6 and 7, More about BlackScholes and the Greeks 