Browse Hierarchy MTH6112: Actuarial Financial Engineering

This module covers advanced techniques in financial mathematics for actuaries, building on the foundational material in Financial Mathematics 1. We revisit the discrete-time binomial model, introducing some more formal concepts such as conditional expectations that allow us to express our earlier results in a more elegant form. Then we look at continuous time models, and use the tools of stochastic calculus to derive the Black-Scholes equation which we then solve explicitly for the prices of European call and put options. We also consider some more advanced applications, such as models for stock prices involving jumps and stochastic volatility, as well as interest rate models and credit risk models.