Course Leader:

Sadna Sajadini sadna@kth.se

Henrik Shahgholian  henriksh@math.kth.se

Start:  Tuesday  January 15,   13.15-15.00, at room 3733, Building of the  Dept. of Mathematics.


Language: English.


Course code: SF2730


Goal: To learn about certain problems in mathematical finance and the PDE approach.  This course is PDE based and will not treat  the Stochastic/Martingale approach.


Topics:

Basic Option Theory:

Option and Markets,  Random Walks, Assets, Payoffs, Strategies, Put-Call parity, Hedging, Volatility, Black-Scholes Equation and its variations, American options.

Mathematical tools:

Partial Differential Equations, Diffusion equations, Initial and boundary conditions, Existence methods, free boundary problems, Obstacle problem.

                                      

Prerequisites:

Diff&Trans SF1629, or equivalent.


Literature:

Wilmott, Paul; Howison, Sam; Dewynne, Jeff:   The mathematics of financial derivatives. A student introduction. Cambridge University Press, Cambridge, 1995. xiv+317 pp. ISBN: 0-521-49699-3


Examination

The examination will consist of two parts.


    * Home work assignments

    * 30 minutes presentation