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