MATH 4380 - A Mathematical Introduction to Options - University of Houston
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MATH 4380 - A Mathematical Introduction to Options

***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:

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