FINC 3375 Financial Instruments and Their Pricing

4 hours; 4 credits

Definitions of some of the most important derivative securities traded in the financial markets: forward and futures contracts, caplets, caps, swaps, and options (Call, Put, Barrier, Bermudan, Asian, Digital, Exotic). The principles of arbitrage pricing and risk-neutral pricing, discrete-time binomial trees. The continuous time Black Scholes model and the Capital Asset Pricing model. The pricing of interest rates in an arbitrage-free framework and important interest rate models. Concentration on stochastic modelling and applications. (This course is the same as Economics 3375 and Mathematics 4601[74.3]. Not open to students who have completed [Business 3375].)

Prerequisite: Mathematics 3601 [74.2] or [Business 3370] or Finance 3370 or Economics 3370 [70.7].


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