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Math 174A: General Course Outline

Catalog Description

174A. Financial Economics for Actuarial Students. (4) Lecture, four hours. Enforced requisites: courses 170A and 170B (or Statistics 100A and 100B), 175. Not open for credit to students with credit for course 174E, Economics 141, or Statistics C183/C283. Specifically designed to prepare students for Society of Actuaries Models for Financial Economics examination. Introduction to basic concepts of financial economics, including interest rate models, rational valuation of derivative securities, and risk management. Letter grading.

Textbook

McDonald, R., Derivatives Market , Addison Wesley.
ActuarialBrew Question set

Schedule of Lectures

Lecture Section Topics

1

1-4, 9.1-3

Introduction to Derivatives, Put-Call Parity, comparing Options

2

10.1-2, 10.3-5

Binomial Tree - stocks, Binomial Tree - multiple periods

3

11.1-4

Risk-Neutral Pricing and Misc topics

4

12.1-2

Black-Scholes Formula

5

12.3, 12.4-5

Black-Scholes Formula - Greeks, B-S Formula: application and volatility

6

13

Delta Hedging

7

14, 18

Exotic Options, Lognormal distribution

8

19.1-5, 20.1-4

Brownian Motion

9

20.5-7, 21.1-2, 22.1-2, 23.1-2

Ito's Lemma & misc topics

10

24.4-5, 24.1-3

Binomial Tree for interest rates, Black Formula, Vasicek and CIR