Math 456
Topics in Financial Mathematics

Prof. M. Victor Wickerhauser




Extensions: ".m" is for Octave, ".mac" is for Macsyma, ".odg" is for LibreOffice Draw, ".ods" is for LibreOffice Calc, ".xls" is for Excel.



Topics. This course is an introduction to the principles and methods of financial mathematics, with a focus on discrete-time stochastic models. Topics include no-arbitrage pricing of financial derivatives, risk-neutral probability measures, the Cox-Ross-Rubinstein and Black-Scholes-Merton options pricing models, and implied volatility.

Prerequisites. Math 233, Math 310, and Math 3200, or permission of the instructor.

Time. Classes meet Mondays, Wednesdays and Fridays, 1:00 pm to 1:50 pm, in Louderman Hall, room 458.

Text. The lectures will follow my book Introducing Financial Mathematics: Theory, Binomial Models, and Applications (2022), ISBN 9781032359854.

Homework assignments:
  • HW #1, due Monday, September 18th.
  • HW #2, due Wednesday, October 4th.
  • HW #3, due Friday, October 27th.
  • HW #4, due Monday, November 6th.
  • HW #5, due Monday, November 20th.
  • HW #6, due Monday, December 11th.
Solutions are due by 11:01pm on the due date. Late homework will not be accepted. Homework should be submitted electronically using GradeScope, accessed from the Canvas website for this course using the "Assignments" menu item.

Final Project. Instead of a midterm or final examination, students will be required to apply concepts and algorithms from this course to complete a Final Project Report using software from the course and data found online. Requirements will be posted by Wednesday, November 29th, 2023, and the project must be submitted electronically by Friday, December 15th, 2023, at 11:01pm.
Prepare a one-page Outline by December 9th, if you wish me to comment on your choices. This should also be submitted electronically.

Grading. One grade will be assigned for homework (with the lowest HW score dropped) and one for the final project. These three will contribute as follows to the course grade: HW 70%, FP 30%. Letter grades, computed from the course score, will be at least the following:

Course score at least:90%80%70%50%
Letter grade at least:ABCD

Students taking the Cr/NCr or P/F options will need a grade of D or better to pass. Students auditing the course will need to show evidence of attending or viewing at least 36 of the lectures in order to receive a successful audit grade.

Office Hours. MWF 2-3pm, namely after each class, in my office in Cupples I, room 105a, or by appointment.

Questions? Return to M. Victor Wickerhauser's home page for contact information.