MATHS517-20B (HAM)

Stochastic Differential Equations with Applications to Finance

15 Points

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Division of Health Engineering Computing & Science
School of Computing and Mathematical Sciences
Department of Mathematics and Statistics

Staff

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Convenor(s)

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: maria.admiraal@waikato.ac.nz

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: debby.dada@waikato.ac.nz

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Paper Description

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The paper provides an informal introduction to stochastic calculus and its applications in finance. The following topics are covered.

Random variables, Brownian motion
Stochastic integration and differentiation
Stochastic differential equations
Applications in finance: stocks, bonds, interest rates, options
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Paper Structure

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Depending on the number of enrolled students, the paper may be offered as a reading course.
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Learning Outcomes

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Students who successfully complete the paper should be able to:

  • solve 31 test problems on the moodle page
    Linked to the following assessments:
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Assessment

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The paper is internally assessed using several assignments and a compulsory final two-hour test.
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Assessment Components

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The internal assessment/exam ratio (as stated in the University Calendar) is 100:0. There is no final exam. The final exam makes up 0% of the overall mark.

The internal assessment/exam ratio (as stated in the University Calendar) is 100:0 or 0:0, whichever is more favourable for the student. The final exam makes up either 0% or 0% of the overall mark.

Component DescriptionDue Date TimePercentage of overall markSubmission MethodCompulsory
1. assignments
40
2. final test
60
Assessment Total:     100    
Failing to complete a compulsory assessment component of a paper will result in an IC grade
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Required and Recommended Readings

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Required Readings

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O. Calin. An introduction to stochastic calculus with applications to finance
D.J. Higham. An algorithmic introduction to numerical simulation of stochastic differential equations
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Recommended Readings

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C.W. Gardiner. Stochastic methods
A.J. Roberts. Elementary calculus of financial mathematics
U.F. Wiersema. Brownian motion calculus
P. Wilmott, S. Howison, J. Dewynne. The mathematics of financial derivatives
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Online Support

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All assignments and notices about this paper will be posted on moodle.
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Workload

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A student might expect to spend about 150 hours in total during a semester on a 15-point paper.
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Linkages to Other Papers

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Prerequisite(s)

Prerequisite papers: MATH311 or MATHS301

Corequisite(s)

Equivalent(s)

Restriction(s)

Restricted papers: MATH517

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