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. Investment portfolio: Markovitz’s
diversification. Capital asset pricing model(CAPM). Utility theory.
Trading in continuous time: geometric Brownian motion model. Option pricing:
Black-Scholes-Merton theory. Hedging in continuous time: the Greeks. American
options. Exotic options. Market imperfections. Term-Structure models: Vasicek,
Hull-White and CIR models. HJM model. Forward LIBOR model.