Math 480 (Topics in Modern Mathematics) - Summer I 1996

Mathematics of Financial Derivatives

Instructor: Dennis DeTurck

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General Information about this course:

• Class meetings were TWTh from 10:00 - 12:00 in DRL 4C6.
• My office is DRL 4E2B, tel. 8-9748, email deturck@math.upenn.edu. I won't keep regular office hours, but I am around a lot.
• Textbook: The Mathematics of Financial Derivatives, A Student Introduction by P. Wilmot, S. Howison and J. Dewynne, published by Cambridge University Press.

Notes on stochastic processes meant to supplement text readings.

• Review of basic probability - single variable probablity distributions.
• Moments and multivariate distributions.
• Functions of random variables. -- Still rough, though. Corrections and diagrams to follow!
• Stochastic processes discrete in space and time(coming!)
• The Maple file for making matrices for the circular random walk. View it, and save it when your screen is full of gobbledy-gook. Remember WHERE you save it --- you can then start Maple and OPEN the file.
• Stochastic processes continuous in time, discrete in space.
• Examples of continuous-time, discrete space stochastic processes.
• Approach to continuity in both space and time - derivation of the Fokker-Planck equation.
• Java simulation of Weiner process.
• Ito's lemma and the simplest stochastic model of asset prices.
• Java simulation of asset price model.