Crosslisted as ACSC 460. Review of financial derivatives including futures, European and American options, and exotic options. Greeks, trading and hedging strategies. Pricing derivative securities with appropriate boundary conditions, including Black-Scholes formula, binomial trees, lattice models and finite difference methods. Simulation and variance reduction techniques. Interest rate models. Covers the learning outcomes regarding financial models in the exam MFE of the Society of Actuaries (SOA), which is also the Exam 3F of the Casualty Actuarial Society (CAS).
Prerequisites & Notes PRQ: STAT 300, or ECON 390 and MATH 230, or consent of department.