MATHS51720B (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)
Yuri Litvinenko
8363
G.3.10
yuri.litvinenko@waikato.ac.nz

Lecturer(s)
Yuri Litvinenko
8363
G.3.10
yuri.litvinenko@waikato.ac.nz

Administrator(s)
: maria.admiraal@waikato.ac.nz
Librarian(s)
: 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
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:
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Assessment
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The paper is internally assessed using several assignments and a compulsory final twohour 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.
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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
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
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 15point paper.
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Linkages to Other Papers
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Prerequisite(s)
Prerequisite papers: MATH311 or MATHS301
Restriction(s)
Restricted papers: MATH517
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