***This is a course guideline. Students should contact instructor for the updated information on current course syllabus, textbooks, and course content*

Prerequisites: MATH 2415 and MATH 3338

Course Description: Arbitrage-free pricing, stock price dynamics, call-put parity, Black-Scholes formula, hedging, pricing of European and American options.

Recommended Text: An Introduction to Financial Option Valuation: Mathematics, Stochastics and Computation | Edition: 1. Cambridge University Press, Desmond Higham. ISBN: 9780521547574

Supplementary Text: primarily for those who will pursue a career in financial engineering is the much more expository textbook of John C. Hull, "Options, futures, and other derivatives" (sixth edition) published by Pearson Prentice Hall. If you plan to pursue a career involving financial engineering then you must have this textbook. ISBN: 978-0131499089

Course Outline:

• Chapter 1, (all sections)
• Chapter 2, (all sections)
• Chapter 3, (this is a review of Math 3338 which is a prerequisite. We will only Sec. 3.6 The Central Limit theorem from the probability textbook for Math 3338.)
• Chapter 5, (all sections: Then we will cover the Binomial trees from Chapter 11 from the book of J.C. Hull (I will give you a copy of the chapter)
• Chapters 6, 7, 8 and 9 (all sections)
  
  Then we will cover the Greek letters which are quantifiers of asset performance and asset risk. If there is time left I want to illustrate the concept of Monte Carlo simulation for asset projections.

Grading: Please consult your instructor's syllabus regarding any and all grading guidelines.

Justin Dart Jr. Center Accommodations:

Academic Adjustments/Auxiliary Aids: The University of Houston System complies with Section 504 of the Rehabilitation Act of 1973 and the Americans with Disabilities Act of 1990, pertaining to the provision of reasonable academic adjustments/auxiliary aids for students who have a disability. In accordance with Section 504 and ADA guidelines, University of Houston strives to provide reasonable academic adjustments/auxiliary aids to students who request and require them. If you believe that you have a disability requiring an academic adjustments/auxiliary aid, please visit Justin Dart Jr. Student Accessibility Center website at https://www.uh.edu/accessibility/ for more information.

UH CAPS

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