MATH 5760/6890, FALL 2010

Introduction to Mathematical Finance I

Course Description

Class Schedule: T,H: 9:10-10:30 a.m., LCB 121

Office Hours: Mondays: 1:00-3:00 p.m., Thursdays: 12:00-2:00 p.m.

Homework Assignments:

• No.1, due Sept 7, 2010 at 5:00 p.m.
• No.2: Problems 1.7, 1.8, and 1.9 from Shreve, due Sept 21, 2010 at 5:00 p.m.
• No.3, due Sept 30, 2010 at 5:00 p.m.
• No.4, due Oct 5, 2010 at 5:00 p.m.
• No.5: Problems 2.2, 2.4, and 2.5 from Shreve, due Oct 19, 2010 at 5:00 p.m.
• No.6: Problems 2.10 and 2.11 from Shreve, due Oct 26, 2010 at 5:00 p.m.
• No.7: Problems 3.4, 3.5 (the last part to compare with problem 2.6 can be skipped) and 3.6 from Shreve, due Nov 9, 2010 at 5:00 p.m.
• No.8: Problems 4.2, 4.5 and 4.6 from Shreve, due Nov 23, 2010 at 5:00 p.m.
• No.9, due Dec 9, 2010 at 5:00 p.m. (Explanations)

Solution Notes:

• No.1
• No.2
• No.3
• No.4, MATLAB codes optionbinomial.m, payoff.m, Excel spreadsheet optionbinomial.xlsx
• No.5
• No.6
• No.7
• No.8

Project Assignments (for 6890):

We will be working on an optimal execution problem for which the main reference is here: "Optimal Execution of Portfolio Transactions"

Sample Problems:

• Sample Test, Solutions

Lecture Notes (in PDF):

• Introduction
• A Simple Description of Trading and Some Jargons
• A Brief Summary of Basic Derivatives
• Summary of Chapter 1
• Summary of the course

MATLAB Resources:

• A very brief tutorial

Supplementary Materials:

• Tracking S&P 500 Index Option Prices: call example in 2000, call example in 2008.
• A practical discussion on the estimate of volatility