Review of probability tools for discrete financial analysis; Conditional probabilities/expectations. Filtrations, adapted and predictable processes. Martingales, submartingales and supermartingales in discrete-time. Doob decomposition for supermartingales. Predictable representation. Discrete- time financial modes: Arbitrage, complete and incomplete markets. Self-financing property, value and gain processes. Valuation of contingent claims. Binomial model: Model specifications, Perfect hedging. Utility functions and consumption/investment problems. European and American options in discrete time. Futures and forward contracts in discrete time. Transition to the continuous-time framework. Prerequisite: STAT 371 or STAT 281 or MATH 467 or consent of the Department.
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LECTURE A1
(51823) |
20 |
2026-09-01 - 2026-12-08 (MWF)
10:00 - 10:50
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