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Apr 25, 2024
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MACT 421 - Mathematics of Derivatives Pricing I
Introduction to financial concepts: Forwards and futures, options, put-call parity, arbitrage and no-arbitrage strategies, pricing forwards with dividends and without dividends, description of commodity and interest rate swaps.
Mathematical techniques for pricing: put-call parity with and without dividends, put-call parity for coupon bonds, relationships between European and American options, properties of options (monotonicity, rate of increments, convexity), one-period and multi-period binomial trees for stock price and forward price, pricing options using a binomial tree, delta hedging, risk-neutral pricing, pricing and hedging American options.
Prerequisites
MACT 321.
When Offered
Offered once a year.
(3 cr.)
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