MA 363: Stochastic Finance I

Credits: 3:0


Financial market. Financial instruments: bonds, stocks, derivatives.  Binomial no-arbitrage pricing model: single period and multi-period models.  Martingale methods for pricing.  American options: the Snell envelope.  Interest rate  dependent assets: binomial models for interest rates, fixed income derivatives, forward measure and future.  Investment portfolio: Markovitz’s diversification.  Capital asset pricing model (CAPM).  Utility theory.


Suggested books :

  1. Luenberger, D.V., Investment Science ,Oxford University Press, 1998.
  2. Shiryaev, A.N., Essentials of Stochastic Finance ,World Scientific, 1999.
  3. Shreve, S.E., Stochastic Calculus for Finance I:  The Binomial Asset pricing Model ,Springer, 2005.

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Contact: +91 (80) 2293 2711, +91 (80) 2293 2625
E-mail: chairman.math[at]iisc[dot]ac[dot]in