Derivative Securities
Course Home Page
Fall, 2006

Instructor: Jonathan Goodman
goodman@cims.nyu.edu
(212)998-3326
Office hours: Wednesday, 10-12, after class, or by appointment. Office: 617

Teaching Assistant: Haiping Shen

Lectures: Wednesdays from 7:10 to 9 pm. starting September 6 in room 808 of the Silver center.

Communication

Class communications will be on the NYU Blackboard system. Always check the Message board there before starting an assignment. There often are corrections or hints. If you are registered, use your netid to login to he NYUHome site, then click on "academics" and then "Derivative Securities". Once there, click on "Communication", then "Discussion Board", the "Message board". Please email me with individual issues such as grading but post questions or comments on the message board. I will post announcements and corrections there.


Course Description


A first graduate course in financial mathematics discussing options and other derivative securities. Quick overview of derivative and options instruments, markets, and market participants. Idealized market models, hedging and arbitrage arguments, and risk neutral pricing. Binomial trees and dynamic programming. Geometric Brownian motion as a limit of binomial trees, Ito calculus (very lightly), and the Black Scholes formula for vanilla European options. Historical and market implied volatilities, skew and smile. Risk, sensitivity (Greeks), and hedging exotics with vanillas. Quick introduction to interest rate modeling.

The prerequisites are linear algebra, multivariate calculus, a calculus based course in probability, and some computer literacy. Computing will be using Microsoft Excel or any compatible spreadsheet program.

The grade will be based on weekly homework assignments and a final exam. Students are encouraged to discuss and help each other with assignments, but students are not allowed to copy homework writeups or spreadsheet work from each other.

The texts for the course are lecture notes by Professor Robert Kohn as revised by Professor Steve Allen and the book "Futures, Options, and Derivative Securities" by John Hull. The lecture notes are on Professor Kohn's web page and the book is in the NYU bookstore.


Outline (to be revised)

Lecture notes by Professor Robert Kohn, revised by Professor Steve Allen

Homework assignments