Math 441 Intro to Mathematics of Finance

· Course Meets: Tuesday, Thursday 11:15 am - 12:30 pm in LGRC A201

· Instructor :

Hongkun Zhang, LGRT 1340, 545-6807  

Office Hours: Tues 1:30-3:00

Email: hongkun at math.umass.edu

· Prerequisites:

Math 131, 132, Stat 240 or equivalent. Maybe partial derivatives (eg Math 233).

· Credit: 3 credit hours.

· Required: 

A calculator with a "solver", say capable of numerically solving exp(x) + exp(3x) + ln(x/2) + x^4 = 17, for example. The calculator should have a cummulative distribution function for the standard normal variable (also known as the ``Erf" function).

· Notes: There will be no required text.. Instead the class will use a set of lecture notes written by Michael Sullivan and Eric Sommers. You can download it from our Spark course website.

· Recommended, but not required: 

Options, Futures and Other Derivatives by John C. Hull, 5th, 6th, or 7th edition, Prentice-Hall 2003, 2006, 2009. 
We will not use the Derivagem software package included in the text. The 6th edition is on reserve at the library. Below are some links for buying the text at reduced price: 
bookzilla.com , economicaltextbooks.com , half.com , amazon.com , Barnes and Nobles.

· Overview: This course is an introduction to the mathematical models used in finance and economics with particular emphasis on models for pricing financial instruments, or "derivatives," such as options and futures. The goal is to understand how the models derive from basic principles of economics, and to provide the necessary mathematical tools for their analysis

· Contents: 
Interest rates ,Bonds ,Swaps ,Forwards ,Options (introduction) ,Discrete probability (reviewed) ,Mean Variance portfolio ,Pricing options (binomial trees) ,Continuous probability ,Pricing options (Black-Scholes formula)

· Exams: The midterm will be in-class on Thursday March 15.

There will be NO make-up midterm. The final exam time will be determined by the Registrar's office later this semester.

· Grading: The grade for the course will be determined by timely-completion of homework well as the two exams. There MAY be several short in-class quizzes that will supplement the homework grade component. The lowest homework or quiz score will be dropped, if it's in your interest. But there will be NO excuses for late or missed homework (or quizzes). That's what the drop is for! There will be  homework almost every week. Homework will be due at the beginning of class on Thursdays, unless otherwise noted, while quizzes will be at the beginning of class on some Tuesdays.

There will be no make-up test, quizzes or final exam administrated. Missed test is assigned a grade of zero. The grade for the course will be computed as follows:

Quizzes and Home-work: 30%;    Midterm exam: 30 %;       Final Examination: 40%

Total: 100%

Final letter grades are assigned traditionally: A (90-100), B (80-90), C (70-79), D (60-69), F (below 60), and subject to the instructor’s judgment.

However, if you miss more than one third of your homework and/or quizzes (drops won't help you here), you'll be penalized by 2/3 of a letter grade; e.g., B+ to B- or C- to D. There will be no make-up or extra-credit work.