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Introduction to the mathematics of options pricing
We present the basic concepts and definitions of
financial options. These will be illustrated with real-time Bloomberg financial
data available in our trading room.
We will introduce the fundamental mathematical basis for option
pricing, focusing on the concepts of arbitrage and risk neutral pricing.
hese will be demonstrated using the two key mathematical models of asset price
dynamics: the discrete time Cox-Ross-Rubinstein tree model
and the continuous time Black-Scholes differential equation model.
Various properties of these models (such as price sensitivities
and leverage effects) will be illustrated.
This presentation is appropriate for students as well as faculty
with no prior experience in financial mathematics.
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