Students who successfully complete the course should be able to:

Describe fundamental derivative instruments such as forwards, futures and options.

Use basic interest rate products and models.

Derive and apply the Black-Scholes-Merton formula for pricing European options, along with its associative sensitivities.

Implement pricing of basic derivatives using the Quantlib package.

Describe the limitations of the models discussed in this course and their domains of application.

Structure and Content

The financial mathematics module covers aspects of mathematical modelling of financial markets. An introduction to financial mathematics is given in the first part of the course. The second part of the course emphasises practical implementation of pricing methods using the Quantlib C++ package.

Topics include: Financial securities, Fixed Income Mathematics, Forward Prices, Call and Put Options, the Binomial Model, Black-Scholes Formula and Option Price Sensitivities and Monte Carlo.