Introduction to Stochastic Calculus

Course aim

To introduce students to the fundamentals of stochastic calculus and its application to financial modelling.

Course content

Probability measure theory; stochastic processes; the Brownian motion and Diffusion Process Models; the Ito calculus; Ito's lemma; solution techniques; Jump-Diffusion Models; application to financial modelling; option pricing models under pure-diffusion and jump-diffusion, American style option pricing and interest rate modelling. Techniques and concepts such as change of numeraire, martingale representation and reflection principle will be covered.

Textbook(s)

Nil

Prerequisite(s)

Common to all relevant programs
Subject Area & Catalogue Number	Course Name
MATH 2020	Statistical Foundations

Corequisite(s)

Nil

Teaching method

Component	Duration
INTERNAL, CITY WEST
Lecture	3 hours x 13 weeks
Tutorial	1 hour x 12 weeks

Note: These components may or may not be scheduled in every study period. Please refer to the timetable for further details.

Assessment

Assignment 1, Assignment 2, Examination

Fees

EFTSL*: 0.125
Commonwealth Supported program (Band 2)
To determine the fee for this course as part of a Commonwealth Supported program, go to:
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Fee-paying program for domestic and international students
International students and students undertaking this course as part of a postgraduate fee paying program must refer to the relevant program home page to determine the cost for undertaking this course.

Non-award enrolment
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* Equivalent Full Time Study Load. Please note: all EFTSL values are published and calculated at ten decimal places. Values are displayed to three decimal places for ease of interpretation.