Martin Baxter Financial Calculus Pdf

Applied Analysis: Financial MathematicsApplied Analysis: Financial MathematicsPeriod: autumn 2011Docent: A.C.M. RanANNOUNCEMENT: The Friday lectures have been re-scheduled to other lecture rooms.On September 16 we shall be in C 147. The new rooms are listed in the current versionof the 'rooster'.Course descriptionnumber of credit points: 6This course gives an introduction intofinancial mathematics. The emphasis is on analysis, althoughthe first few weeks a more stochastic approach is sketched.For the latter part we use the book: Financial Calculus, Anintroduction to derivative pricing, by Martin Baxter andAndrew Rennie (Cambridge University Press, Cambridge, 1996),out of which we treat the first two chapters.The rest of the course is based on the book The Mathematics ofFinancial Derivatives, A student introduction, byP. Howison, and J. Dewynne (Cambridge UnversityPress, 1995). Out of this book we treat at least chapters 1,2, 3, 4, 5, 7, 8, 9.

The student should also read chapter 10.The following topics are treated:.introduction to the theory of options.binomial tree model;.introduction to Ito-calculus;.the Black-Scholes model;.the classical partial differential equations;.the Black-Scholes formula with applications;.American options and free boundary problems;.introduction to numerical methods for pde's based onapplications in financial mathematics.Course schedule and gradingLectures will be on Tuesday (15.30-17.15) andFriday (11.00-12.30) for the first seven weeks. Please check the schedulefor the locations.There will be homework to behanded in, this counts towards the grade. There will be afinal oral examination.literature.Martin Baxter en Andrew Rennie:Financial Calculus, An introduction to derivativepricing,(CambridgeUniversity Press, Cambridge, 1996).P. Howison, en J.

Martin Baxter Financial Calculus Pdf Online

Dewynne:The Mathematics of Financial Derivatives, A student introduction,(Cambridge Unversity Press, 1995)Prerequisites:Calculus, Probability Theory and Analysis.Intended audience: 3W, 3 Ectr, Master BMI, MasterMathematics, Master SFM.Email address:Room: R3.45telephone: 0Homework and ExaminationFirst homework. Read Chapter 1 of the book by Wilmott et al.Produce and hand in a plot containing the payoff diagram (as afunction of exercise price, and for a fixed share price) of anoption (either call or put), combined with option prices.(Compare the graph in the book, or the graphs produced in class.)You have to be explicit about the source of your data, and aboutwhat the graph actually shows.The deadline for this is Tuesday, September 20.Second homework. This is available as a pdf file:.Third set of exercises: from Wilmott et al., Chapter 2, exercises 1, 3, and 5.Fourth set of exercises: from Wilmott et al.

Chapter 3, exercises 2b, d, 3, and 6.The deadline for this set of homeworks is Friday November 4.A pdf file for the lecture on separation of variables for the heat equation ona finite interval is available.