Introductory Financial Mathematics

This course is an introduction to mathematical methods used in finance and their applications. No prior knowledge of finance is assumed. Basic financial instruments such as forward and futures contracts, options, and bonds are introduced. The course is built around three major themes: (i) risk-free assets and the term structure of interest rates; (ii) Markowitz portfolio optimization and the Capital Asset Pricing Model; (iii) No Arbitrage principle and its applications including pricing and hedging of derivative securities in the context of the multi-period binomial model and its continuous analog, the BlackScholes model. Students are expected to use their knowledge of probability, single and multivariable calculus, and basic linear algebra to master mathematical finance theories and apply them in real world situations.