MST30030: Financial Mathematics
Semester 1, 2013
Lecturer: Masha Vlasenko
The ultimate goal of this course is to introduce students to the BlackScholes Model for options pricing. The module opens by looking at various types of options and discussing their properties. The technique of constructing binomial trees to price options (based on the Cox, Ross and Rubenstein paper of 1979) is then discussed in detail. We then study the model of stock price behaviour introduced by Black, Scholes and Merton in 1973, and derive the BlackScholes model for valuing European call and put options on a nondividendpaying stock. A brief introduction to probability theory is included in the course.
Our main textbook is John C. Hull, "Options, Futures and Other Derivatives".
FINAL EXAM took place on Saturday, December 14:
[paper],
[solutions],
grading scheme
Sample exam
[paper] and
[solutions]. See the last pages of lecture notes for the information on this year's exam questions.
Continuous assessment marks are
here.
 Lecture 1: Financial Derivatives [pdf]
 Lecture 2: Traders [pdf]
 Lecture 3: Interest Rates [pdf]
 Lecture 4: Properties of Stock Options [pdf]
 Lecture 5: PutCall Parity [pdf]
 Lectures 67: Axioms of Probability Theory  Discrete Models
 Lectures 810: Axioms of Probability Theory  Continuous Models
[pdf]
 Lecture 11: Conditional Probability
 Lecture 12: Stochastic Independence
 Lecture 13: Random Variables
 Lecture 14: Binomial Distribution
 Lecture 15: Normal Distribution
[pdf]
 Lecture 16: Delta Hedging [pdf]
 Lecture 17: Binomial Tree Model for Option Pricing [pdf]
 Lecture 18: Stochastic Processes and Brownian Motion
 Lectures 1920: Stochastic Models for Stock Market
[pdf]
 Lectures 2122: BlackScholes Formula for Option Prices [pdf]
 Lectures 2324: BlackScholesMerton Differential Equation [pdf]
IMPORTANT: The lecture on Friday takes place in Theater O (Newman Building).
Tutorial materials
Assessment
 30% continuous assessment
 70% final exam
