units

ETC5351

Faculty of Business and Economics

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Monash University Handbook 2010 Postgraduate - Unit

6 points, SCA Band 0 (NATIONAL PRIORITY), 0.125 EFTSL

LevelPostgraduate
FacultyFaculty of Business and Economics
OfferedClayton First semester 2010 (Day)
Coordinator(s)Professor Fima Klebaner and Professor Don Poskitt

Synopsis

Mathematical definition of options and other financial derivatives, probability models, mathematical models of random processes, applications, numerical methods, Monte Carlo methods.

Objectives

The learning goals associated with this unit are to:

  • develop an understanding of the modern approach to evaluation of uncertain future payoffs
  • develop an understanding of the concepts of arbitrage and fair games and their relevance to finance and insurance
  • develop an understanding of concept of conditional expectation and martingales and their relation to pricing of financial derivatives
  • develop an understanding of the random processes such as Random Walk, Brownian Motion and Diffusions and be able to apply them for modelling real life processes and risk models
  • obtain skills to use Ito's formula
  • develop the skills to price options by using the Binomial and Black-Scholes models
  • ability to simulate the price process and obtain prices by simulation
  • ability to formulate discrete time Risk Model in Insurance and use it for control of probabilities of ruin.

Assessment

Within semester assessment: 40%
Examination: 60%

Chief examiner(s)

Professor Fima Klebaner

Contact hours

3 one-hour lectures and 1 one-hour tutorial/practice class per week