August 30, 2004 (corrected 9/7/04)

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Bryn Mawr College - Fall, 2004
Math 225 - Introduction to Financial Mathematics

Class: Park Science Building 349, MWF 11:00 am - 12:00 noon

Instructor: Walter Stromquist    Office: Park 330
   Office hours: MF 3-4, W 3-6, Tu/Th by appt.
   Phone: Cell 610-220-4382; Office 610-526-5352
   Email: wstromqu@brynmawr.edu

Text: Sheldon M. Ross, An Elementary Introduction to Mathematical Finance: Options and Other Topics, 2nd Edition, Cambridge University Press, ISBN 0521814294.

Web site:    http://www.brynmawr.edu/math/people/stromquist/math225/index.html (tentative)

Course content (tentative):

  • Interest and discount rates:
          Compound and continuous rates, yield curves and forward rate curves, discounted cash flow.
  • Modeling stock prices:
          Random variables, density functions, cumulative distribution functions, normal distributions;
          Expected value, variance, covariance, central limit theorem;
          Random walk model and Geometric Brownian Motion (GBM)
  • Estimating the parameters of a GBM process (why you can determine the riskiness of a stock from its history, but not its average rate of growth)
  • Options and option pricing:
          Rolling up a decision tree vs. replication and arbitrage
  • The Black-Scholes formula
  • Diversification and portfolio optimization:
          Efficient frontier; maybe the capital asset pricing model (CAPM)
  • Whatever else seems like fun.

    Prerequisite: Two semesters of calculus (through Math 102). Multivariate calculus, linear algebra, probability, statistics, and economics are all very useful, but knowledge of these subjects will definitely not be assumed and the necessary background will be covered as we go along.

    Course requirements: Weekly homework, occasional in-class quizzes, two self-scheduled exams, and a final exam; all dates TBD.

    Students who may need accommodations in this course because of a disability or for any other reason are encouraged to meet with the instructor as soon as possible.


    back to Math 225 page
    back to Walter Stromquist's page