Math 358 Mathematical Finance

Objective and Overview

This course will cover the theory of option pricing, emphasizing the Black-Scholes model and interest rate models. Implementation of the theory and model calibration are covered in the companion course, Numerical Methods for Finance, Math 361A. We will see the binomial no-arbitrage pricing model, state prices, Brownian motion, stochastic integration, and Ito’s lemma, the Black-Scholes equation, risk-neutral pricing and Girsanov theorem, change of numeraire and two term structure models: Vasicek and LIBOR. Prerequisite: Mature understanding of advanced calculus and probability (at the level of Math 251) and permission of instructor. Math 256 would be helpful. 


Mature understanding of Multivariable Calculus and Math 251 Probability and permission of the instructor.  Some familiarity with simple partial differential equations would be helpful. 

Who should take this course?

This course is required for all MSFE students.

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