Prerequisites: MATH 2433 and MATH 3338
Course Description: Arbitrage-free pricing, stock price dynamics, call-put parity, Black-Scholes formula, hedging, pricing of European and American options.
Recommended Text: An Introduction to Financial Option Valuation: Mathematics, Stochastics and Computation | Edition: 1. Cambridge University Press, Desmond Higham. ISBN: 9780521547574
Supplementary Text: primarily for those who will pursue a career in financial engineering is the much more expository textbook of John C. Hull, "Options, futures, and other derivatives" (sixth edition) published by Pearson Prentice Hall. If you plan to pursue a career involving financial engineering then you must have this textbook. ISBN: 978-0131499089
- Chapter 1, (all sections)
- Chapter 2, (all sections)
- Chapter 3, (this is a review of Math 3338 which is a prerequisite. We will only Sec. 3.6 The Central Limit theorem from the probability textbook for Math 3338.)
- Chapter 5, (all sections: Then we will cover the Binomial trees from Chapter 11 from the book of J.C. Hull (I will give you a copy of the chapter)
- Chapters 6, 7, 8 and 9 (all sections)
Then we will cover the Greek letters which are quantifiers of asset performance and asset risk. If there is time left I want to illustrate the concept of Monte Carlo simulation for asset projections.
*Note: Students should visit their instructor's website for Course Structure and Grading Policies, as this information is typically included in the instructor's syllabus. This is a course guideline and is merely an example of what the course structure may be and therefore, should be confirmed with the instructor. Students should contact the instructor for the updated information on current course syllabus, textbooks, and course content
Academic Adjustments/Auxiliary Aids: The University of Houston System complies with Section 504 of the Rehabilitation Act of 1973 and the Americans with Disabilities Act of 1990, pertaining to the provision of reasonable academic adjustments/auxiliary aids for students who have a disability. In accordance with Section 504 and ADA guidelines, University of Houston strives to provide reasonable academic adjustments/auxiliary aids to students who request and require them. If you believe that you have a disability requiring an academic adjustments/auxiliary aid, please visit The Center for Students with DisABILITIES (CSD) website at http://www.uh.edu/csd/ for more information.
Accommodation Forms: Students seeking academic adjustments/auxiliary aids must, in a timely manner (usually at the beginning of the semester), provide their instructor with a current Student Accommodation Form (SAF) (paper copy or online version, as appropriate) from the CSD office before an approved accommodation can be implemented.
Details of this policy, and the corresponding responsibilities of the student are outlined in The Student Academic Adjustments/Auxiliary Aids Policy (01.D.09) document under [STEP 4: Student Submission (5.4.1 & 5.4.2), Page 6]. For more information please visit the Center for Students with Disabilities Student Resources page.
Additionally, if a student is requesting a (CSD approved) testing accommodation, then the student will also complete a Request for Individualized Testing Accommodations (RITA) paper form to arrange for tests to be administered at the CSD office. CSD suggests that the student meet with their instructor during office hours and/or make an appointment to complete the RITA form to ensure confidentiality.
*Note: RITA forms must be completed at least 48 hours in advance of the original test date. Please consult your counselor ahead of time to ensure that your tests are scheduled in a timely manner. Please keep in mind that if you run over the agreed upon time limit for your exam, you will be penalized in proportion to the amount of extra time taken.
Counseling and Psychological Services (CAPS) can help students who are having difficulties managing stress, adjusting to college, or feeling sad and hopeless. You can reach (CAPS) by calling 713-743-5454 during and after business hours for routine appointments or if you or someone you know is in crisis. No appointment is necessary for the "Let's Talk" program, a drop-in consultation service at convenient locations and hours around campus.