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 Email 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

    1. Paul Wilmott Introduces Quantitative Finance (second edition)
    2. Risk Management and Financial Institutions (Wiley Finance) 4th Edition by John C. Hull
    3. 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