# Singapore University of Social Sciences

## Applied Financial Mathematics I (MTH359)

Applications Open: 01 April 2021

Applications Close: 31 May 2021

Next Available Intake: July 2021

Language: English

Duration: 6 months

Fees: \$1378 View More Details on Fees

Area of Interest: Science & Technology

Schemes: Lifelong Learning Credit (L2C)

Funding: To be confirmed

School/Department: School of Science & Technology

### Synopsis

MTH359 Applied Financial Mathematics I gives an introduction to basic option theory and pricing formula for the Black-Scholes model. The alternating phases of economic growth and decline cause fluctuations in financial assets which is a major pain point. Hence, mathematics is applied to finance to better understand and manage the risks associated with trading options. Mathematical rigor will be emphasized in the course.

Level: 3
Credit Units: 5
Presentation Pattern: Every July

### Topics

• Basic concepts financial markets
• Type of options: Puts & Calls, European & American
• Interest rates
• Binomial tree model for modelling price processes
• Hedging strategies and risk-neutral option valuation
• Normal distributions
• Wiener processes (Brownian motion)
• Stochastic differential equations
• Itô’s lemma
• Black-Scholes analysis and formula
• Boundary and final conditions
• Implied volatility

### Learning Outcome

• Differentiate between the types of options: Puts & Calls, European & American.
• Compute the expected value of a financial contract using binomial tree model.
• Construct the Itô’s integral.
• Set up hedging strategies to minimise risks.
• Solve pricing problems with the application of Black-Scholes formula.
• Calculate the implied volatility for an option contract.