FE530 Introduction to Financial Engineering
Course Catalog Description
Introduction
Building on mathematical models of bond and stock prices, the course leverage the two theories in different directions: Black-Scholes arbitrage pricing of options and other derivative securities on the one hand, and Markowitz portfolio optimization and the Capital Asset Pricing Model on the other hand. Models based on the principle of no-arbitrage can also be developed to study interest rates and their term structure. These are three major areas of mathematical finance, all having an enormous impact on the way modern financial markets operate. The course presents the topics at an introductory level aimed at senior undergraduate students, not only of mathematics, but also business management, finance, or economics.
Prerequisite: Having taken an undergraduate course in business information systems or by
permission of the instructor.
Campus | Fall | Spring | Summer |
---|---|---|---|
On Campus | X | X | |
Web Campus | X | X |
Instructors
Professor | Office | |
---|---|---|
Dr. Majeed Simaan | msimaan@stevens.edu | Peirce 116 |
More Information
Course Outcomes
After successful completion of this course, students will be able to
- Understand basic financial concepts in FE, e.g., time value of money and no-arb pricing
- Build discrete-time models, e.g., binomial trees
- Develop continuous-time models, e.g., Brownian motion
- Value different asset classes and derivatives
- Perform statistical and numerical analysis
Course Resources
Textbook
Mathematics for Finance: An Introduction to Financial Engineering 2nd ed. 2011 Edition by Marek Capiński and Tomasz Zastawniak (CZ)
Additional References
- Paul Wilmott Introduces Quantitative Finance (second edition)
- Risk Management and Financial Institutions (Wiley Finance) 4th Edition by John C. Hull
- Practical Methods of Financial Engineering and Risk Management: Tools for Modern Financial Professionals by Rupak Chatterjee
Grading
Grading Policies
Weights | ||
1 | Exam 1 | 25% |
2 | Exam 2 | 25% |
3 | Class Project | 20% |
4 | Homeworks | 20% |
5 | Participation | 10% |
Lecture Outline
Topic | Readings | Assignments | |
---|---|---|---|
Week 1 Jan 18, 2022 |
Introductory Class | ||
Week 2 Jan 25, 2022 |
A Simple Market Mode | Ch. 1 from CZ | |
Week 3 Feb 1, 2022 |
Risk-Free Assets | Ch. 2 from CZ | |
Week 4 Feb 8, 2022 |
Portfolio Management | Ch. 3 from CZ | |
Week 5 Feb 15, 2022 |
Forwards and Futures Contracts | Ch. 4 from CZ | |
Week 6 Feb 22, 2022 |
Presidents’ Day Monday Class Schedule(due Oct 28) | ||
Week 7 Mar 1, 2022 |
Midterm Review | Ch. 5 from CZ | HW1 Due |
Week 8 Mar 8, 2022 |
Midterm | ||
Week 9 Mar 15, 2022 |
Spring Recess; No Classes; |
||
Week 10 Mar 22, 2022 |
Options: General Properties | ||
Week 11 Mar 29, 2022 |
Binomial Model | Ch. 6 from CZ | Project Proposal Due March 28, 2022 |
Week 12 April 5, 2022 |
Binomial Model II | Ch. 6 from CZ | |
Week 13 April 12, 2022 |
Continuous Time Model | Ch. 8 from CZ | HW2 Update Due |
Week 14 April 19, 2022 |
BlackScholes Model | Ch. 8 from CZ | |
Week 15 April 26, 2022 |
Final Review | HW2 Due | |
Week 15 April May 3, 2022 |
Project Presentation | Submit Final Project Due Finals Weekend |