M A T H.   O F   F I N A N C I A L   D E R I V A T I V E S   -  F A L L   2 0 1 7 

LECTURES: Monday 6:30pm-9:15pm, in SCI 113.

INSTRUCTOR: Solesne Bourguin, office hours Wednesday 12:00pm-1:00pm (my office is MCS 226).

GRADER: Shuai Yuan (ysstats@bu.edu). Don't hesitate to contact him if you have questions.

COURSE DESCRIPTION: In this class, we will develop the probabilistic tools used in finance and present the methodologies that are used in the pricing of financial derivatives. No previous knowledge of finance is required. Financial topics include forward and futures contracts, options pricing (binomial trees and the Black-Scholes model), bonds, interest rates, and swaps. Probability topics include stochastic processes, conditional expectation, martingales, Brownian motion, stochastic integrals, and change of measure (Girsanov theorem).

TEXTBOOK: Options, Futures, and Other Derivatives, 9th Edition, by John C. Hull, Pearson 2015.

GRADING: mini quizzes (10%), problem sets (20%), midterm exam (30%) and a final exam (40%).

MINI QUIZ: Each class will begin with a short quiz on the material from the previous week. Immediately after the quiz, we will discuss the answers. For this reason, there can be no make-ups for mini quizzes.

HOMEWORK: Every Monday for the next Monday. Late homeworks will not be accepted at all. See below table for assignments and due dates.

SCHEDULE OF EXAMS: The midterm exam will be held on Monday, October 30th from 6:30pm to 8:00pm and will cover all that has been done up to Monday, October 16th included. The (cumulative) final exam will be held on Monday, December 18th, from 6:00pm to 8:00pm in SCI 113.

EXAM REVIEWS: These are the exam reviews that will be solved in class (for the midterm and final exams).

10/23/2017:  [Midterm exam review], [Solution to the midterm exam review].
12/11/2017:  [Final exam review], [Solution to the final exam review].

EXAMS: These are the actual exams given in class.

10/30/2017:  [Midterm exam], [Solution to the midterm exam].

SLIDES: These are the slides used in class, in the handout format as well as the full size slide format. This section will be updated weekly and new slides will be added after the lectures.

09/11/2017:  [Slides for lecture 1],   [Handout for lecture 1].
09/18/2017:  [Slides for lecture 2],   [Handout for lecture 2].
09/25/2017:  [Slides for lecture 3],   [Handout for lecture 3].
10/02/2017:  [Slides for lecture 4],   [Handout for lecture 4].
10/10/2017:  [Slides for lecture 5],   [Handout for lecture 5].
10/16/2017:  [Slides for lecture 6],   [Handout for lecture 6].
11/06/2017:  [Slides for lecture 7],   [Handout for lecture 7].
11/13/2017:  [Slides for lecture 8],   [Handout for lecture 8].
11/20/2017:  [Slides for lecture 9],   [Handout for lecture 9].
11/27/2017:  [Slides for lecture 10],   [Handout for lecture 10].
12/04/2017:  [Slides for lecture 11],   [Handout for lecture 11].

PROBLEM SETS: The following table summarizes the homework assignments (to be found in the exercises sections of the textbook) and due dates (due in class, not in my office or mailbox). Please staple your homework sets to keep loose pages from getting lost. Remember that while working together on homeworks is encouraged, homeworks should be written up separately. Handing in substantially identical homeworks is a violation of the academic conduct code. Make sure you use the correct edition of the book (9th edition) as exercises are not the same in all editions.

Table of homework assignments
Homework Assignment Due date
HW #1 Chapter 1: 1.4, 1.6, 1.7, 1.10, 1.13, 1.17, 1.27, 1.33, 1.41. Chapter 3: 3.8, 3.16, 3.27. Monday, September 18th
HW #2 Chapter 4: 4.4, 4.10, 4.25. Chapter 5: 5.3, 5.9, 5.14. Chapter 11: 11.10, 11.12, 11.22, 11.23, 11.24, 11.25. Monday, September 25th
HW #3 Chapter 13: 13.5, 13.6, 13.7, 13.9, 13.11, 13.12, 13.14. Monday, October 2nd
HW #4
[Homework assignment 4]          [Solution]
Tuesday, October 10th
HW #5
[Homework assignment 5]          [Solution]
Monday, October 16th
HW #6
[Homework assignment 6]          [Solution]
Monday, October 23rd
HW #7 Chapter 15: 15.8, 15.13, 15.14, 15.16, 15.18, 15.22, 15.28. Monday, November 6th
HW #8 Chapter 19: 19.3, 19.5, 19.15, 19.23, 19.24, 19.25, 19.28(a)(b)(c). Monday, November 13th
HW #9 Chapter 12: 12.12, 12.13, 12.15, 12.20,12.24, 12.26, 12.27. Monday, November 20th
HW #10 Chapter 4: 4.11, 4.12, 4.13, 4.15, 4.16, 4.21, 4.30. Monday, November 27th
HW #11 Chapter 7: 7.1, 7.4, 7.9, 7.16, 7.18, 7.20. Monday, December 4th