MA 263: Stochastic Finance I

Credits: 3:0

Financial market. Financial instruments: bonds, stocks, derivatives.  Binomial no-arbitrage pricing model: single period and multi-period models.  Martingale methods for pricing.  American options: the Snell envelope.  Interest rate  dependent assets: binomial models for interest rates, fixed income derivatives, forward measure and future.  Investment portfolio: Markovitz’s diversification.  Capital asset pricing model (CAPM).  Utility theory.

Suggested books and references:

  1. Luenberger, D.V., Investment Science, Oxford University Press, 1998.
  2. Shiryaev, A.N., Essentials of Stochastic Finance, World Scientific, 1999.
  3. Shreve, S.E., Stochastic Calculus for Finance I:  The Binomial Asset pricing Model, Springer, 2005.

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Contact: +91 (80) 2293 2711, +91 (80) 2293 2265 ;     E-mail: chair.math[at]iisc[dot]ac[dot]in
Last updated: 22 Jun 2024