Continuous-Time Financial Modelling - FMA 677

This course discusses the continuous time modelling under deterministic interest rates. Black- Scholes model and its variants; Continuously rebalanced portfolio and the existence and uniqueness of a martingale probability measure; Study of volatility: historical, implied, risk-neutral marginal distributions and local volatility models; Call and put options; rational exercise time; early exercise premium and optimal exercise boundaries; Cross currency derivatives; currency forward contracts and options and options on a foreign stock. Prerequisites: MAT 670, FMA 640.