MATHS 7070 - Financial Modelling: Tools & Techniques
Career: | Postgraduate Coursework |
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Units: | 3 |
Term: | Semester 2 |
Campus: | North Terrace |
Contact: | Up to 3 hours per week |
Available for Study Abroad and Exchange: | Yes |
Available for Non-Award Study: | No |
Assumed Knowledge: | ECON 1010 or MATHS 1010 or MATHS 1011; familiarity with Excel spreadsheets |
Assessment: | Ongoing Assessment, exam |
Syllabus: |
The growth of the range of financial products that are traded on financial markets or are available at other financial institutions, is a notable feature of the finance industry. A major factor contributing to this growth has been the development of sophisticated methods to price these products. The significance to the finance industry of developing a method for pricing options (financial derivatives) was recognized by the awarding of the Nobel Prize in Economics to Myron Scholes and Robert Merton in 1997. The mathematics upon which their method is built is stochastic calculus in continuous time. Binomial lattice type models provide another approach for pricing options. These models are formulated in discrete time and the examination of their structure and application in various financial settings takes place in a mathematical context that is less technically demanding than when time is continuous. This course discusses the binomial framework, shows how discrete-time models currently used in the financial industry are formulated within this framework and uses the models to compute prices and construct hedges to manage financial risk. Spreadsheets are used to facilitate computations where appropriate. Topics covered are: The no-arbitrage assumption for financial markets; no-arbitrage inequalities; formulation of the one-step binomial model; basic pricing formula; the Cox-Ross-Rubinstein (CRR) model; application to European style options, exchange rates and interest rates; formulation of the n-step binomial model; backward induction formula; forward induction formula; n-step CRR model; relationship to Black-Scholes; forward and future contracts; exotic options; path dependent options; implied volatility trees; implied binomial trees; interest rate models; hedging; real options; implementing the models using EXCEL spreadsheets. |
Course Fees
Study Abroad student tuition fees are available here
Only some Postgraduate Coursework programs are available as Commonwealth Supported. Please check your program for specific fee information.
The fees displayed below for international students are for students commencing a program in 2024 only. International students who commenced a program in 2023 or prior can find their fee here.
EFTSL | |||
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0.125 |
Course Outline
A Course Outline which includes Learning Outcomes, Learning Resources, Learning & Teaching for this course may be accessed here
Critical Dates
Term | Last Day to Add Online | Census Date | Last Day to WNF | Last Day to WF |
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Semester 2 | Mon 05/08/2024 | Wed 14/08/2024 | Fri 13/09/2024 | Fri 25/10/2024 |
Class Details
Enrolment Class: Seminar | |||||||
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Class Nbr | Section | Size | Available | Dates | Days | Time | Location |
25096 | SE01 | 10 | 9 | 23 Jul - 10 Sep | Tuesday | 2pm - 3pm | Napier, G04, Lecture Theatre |
1 Oct - 22 Oct | Tuesday | 2pm - 3pm | Napier, G04, Lecture Theatre | ||||
Related Class: Workshop | |||||||
Class Nbr | Section | Size | Available | Dates | Days | Time | Location |
25103 | WR03 | 2 | 2 | 26 Jul - 13 Sep | Friday | 11am - 12pm | Hughes, 111a, Teaching Room |
4 Oct - 25 Oct | Friday | 11am - 12pm | Hughes, 111a, Teaching Room | ||||
25104 | WR02 | 2 | 2 | 22 Jul - 9 Sep | Monday | 1pm - 2pm | Hughes, 111a, Teaching Room |
30 Sep - 21 Oct | Monday | 1pm - 2pm | Hughes, 111a, Teaching Room | ||||
25105 | WR01 | 2 | 1 | 22 Jul - 9 Sep | Monday | 11am - 12pm | Engineering & Mathematics, EMG06, Teaching Room |
30 Sep - 21 Oct | Monday | 11am - 12pm | Engineering & Mathematics, EMG06, Teaching Room | ||||
25109 | WR05 | 2 | 2 | 26 Jul - 13 Sep | Friday | 12pm - 1pm | Hughes, 323, Teaching Room |
4 Oct - 25 Oct | Friday | 12pm - 1pm | Hughes, 323, Teaching Room | ||||
25110 | WR04 | 2 | 2 | 22 Jul - 9 Sep | Monday | 2pm - 3pm | Hughes, 111a, Teaching Room |
30 Sep - 21 Oct | Monday | 2pm - 3pm | Hughes, 111a, Teaching Room |