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MATH 2281 3.00MW (Winter 2012)
Financial Economics
Course Notes and Topics


Lecture notes are given below, based on last year's version of the course. This year's version will follow them closely, though not everything will be exactly the same.

The Hull book contains much more information than we will go into in class, about the actual operation of futures and options markets, and about the use of futures and options in the world of finance. The course emphasizes mathematical aspects of the subject, and we do that in a bit more depth than Hull. Students are encouraged to read the background information, but doing so is optional (and indicated as such below). Students are responsible for what is covered in class (there is typically more detail given in the textbook).

Lecture notes and topics

Forwards and Futures

Options

Topics for the first midterm

You are responsible for what we did in class, but the (roughly) corresponding sections are: Last year's first midterm is available here (and also with solutions)

Topics for the second midterm

You are responsible for what we did in class. The (roughly) corresponding sections are: You aren't responsible for the Central limit argument that we used to obtain lognormal stock prices. But you are responsible for using the lognormal distribution to calculate option prices (eg BSM). You are only responsible for the tree-based model of dividends I called "eg 2", on p. 53.2 of the lecture notes. Not the other tree-based models (ie. egs 1/3/4). You are responsible for BSM with dividends. You will be given a table of the normal distribution for the exam.

Last year's second midterm, with solutions, is available here. Note that the topics weren't identical to the topics for our midterm, since it didn't come at exactly the same point in the term.

Topics for the final exam

You should bring a calculator and formula sheet (letter sized sheet, double sided) to the final exam. In addition to the material you were responsible for on the first and second midterms, you are responsible for the following topics: In other words, no complete markets theory, no Gamma/Theta/etc. beyond simply the definitions, no exotic options, and no GBM.