Probability and Finance
Probability spaces: sigma-algebra, measurement, random variables. Expected value and integrability. Convergences. Conditional hope and independence. Introduction to martingales. Financial derivatives: European, American, exotic. No-arbitrage principle. Risk-neutral measure.
Derivatives pricing. Binomial tree. Pricing of American derivatives.
Basic Information
Workload
60 hours
Mandatory:
- Rosenthal, J. (2006). First Look at Rigorous Probability Theory (2nd). World Scientific.
- Shreve, S. (2004). Stochastic Calculus for Finance I: The Binomial Asset Pricing Model. Springer Finance