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University of Western Australia

Areas of Study

4A1: Financial Mathematics

  • MATH7421
  • Semester 1 (see Timetable)
  • 6 points
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This unit covers the following topics:<br/><br/>(1) Single and multiple period deterministic problems; fixed income securities; term structure of interest rates; yield curve; forward rates; immunisation; applied interest rate analysis; and valuation via dynamic programming;<br/><br/>(2) Single period random cash flows; mean-variance portfolio theory (Markowitz theory)—asset returns, diversification; efficient frontier, Sharpe ratio; effect of a risk-free asset; capital asset pricing model; and an introduction to Arbitrage Pricing Theory; and<br/><br/>(3) Derivative securities; forward contracts, hedging; Binomial lattice model and random walks; option pricing—arbitrage, equivalent... -- Course Website

Instructor: Assistant Professor John Lau

Prerequisites: MATH2209 Calculus and Probability



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