This module formally introduces students to the discipline of financial mathematics, providing them with an understanding of some of the maths that is used in the financial and business sectors.
Students will begin to encounter financial terminology and will study both European and American option pricing. The module will cover these in relation to discrete and continuous financial models, which include binomial, finite market and Black-Scholes models.
Students will also explore mathematical topics, some of which may be familiar, specifically in relation to finance. These include:
Throughout the module, students will learn key financial maths skills, such as constructing binomial tree models; determining associated risk-neutral probability; performing calculations with the Black-Scholes formula; and proving various steps in the derivation of the Black-Scholes formula. They will also be able to describe basic concepts of investment strategy analysis, and perform price calculations for stocks with and without dividend payments.
In addition, to these subject specific skills and knowledge, students will gain an appreciation for how mathematics can be used to model the real-world; improve their written and oral communication skills; and develop their critical thinking.