MAT4735 – Advanced financial modelling
Course description
Schedule, syllabus and examination date
Course content
The course deals with a wide range of topics in financial modelling in continuous time. These include risk neutral pricing and hedging, term structure models, complete and incomplete markets, pricing measures, change of "numéraire", jump-diffusions, and stochastic volatility modelling. These techniques will be discussed within the context of different markets: stocks, fixed-income and commodities, particularly energy. We keep a focus on financial derivatives: pricing and hedging. Similarities and differences among these markets will be discussed. Black-Scholes type of market models will be used for stocks. Short term rate models and forward rate models will be used for fixed-income and commodities. For the latter the models will be based on jump-diffusions.
Learning outcome
After completing the course you will
- have an understanding of the principles of price modelling in the stocks, fixed-income, and commodities markets
- know the typical financial instruments in these markets, putting special emphasis on financial derivatives
- know the standard models in the different markets, including: Black-Scholes model (Geometric Brownian motion), Vasicek model (Ornstein-Uhlenbeck), Heston model (Cox-Ingersoll-Ross), Forward curve models (Heath-Jarrow-Morton), also with jump-diffusion variants, where applicable
- know the core methods behind pricing and hedging in these markets: non-arbitrage valuation, change of numéraire, replicability and self-financing strategies, completeness, risk-neutral pricing measures including Escher transforms.
Admission to the course
Students admitted at UiO must?apply for courses?in Studentweb. Students enrolled in other Master's Degree Programmes can, on application, be admitted to the course if this is cleared by their own study programme.
Nordic citizens and applicants residing in the Nordic countries may?apply to take this course as a single course student.
If you are not already enrolled as a student at UiO, please see our information about?admission requirements and procedures for international applicants.
Recommended previous knowledge
Overlapping courses
- 10 credits overlap with MAT9735 – Advanced financial modelling.
- 4 credits overlap with MAT4750 – Mathematical Finance: Modelling and Risk Management.
- 4 credits overlap with MAT4770 – Stochastic Modelling in Energy and Commodity Markets.
- 4 credits overlap with STK4530 – Interest Rate Modelling via SPDE's.
Teaching
4 hours of lectures/exercises per week throughout the semester.
The course may be taught in Norwegian if the lecturer and all students at the first lecture agree to it.
Upon the attendance of three or fewer students, the lecturer may, in conjunction with the Head of Teaching, change the course to self-study with supervision.
Examination
Final written exam or final oral exam, which counts 100 % towards the final grade.
The form of examination will be announced by the lecturer by 1 October/1 March for the autumn semester and the spring semester respectively.
This course has 1 mandatory assignment that must be approved before you can sit the final exam.
It will also be counted as one of the three attempts to sit the exam for this course, if you sit the exam for one of the following courses: MAT9735 – Advanced financial modelling
Examination support material
No examination support material is allowed.
Language of examination
Courses taught in English will only offer the exam paper in English. You may write your examination paper in Norwegian, Swedish, Danish or English.
Grading scale
Grades are awarded on a scale from A to F, where A is the best grade and F is a fail. Read more about the grading system.
Resit an examination
This course offers both postponed and resit of examination. Read more:
More about examinations at UiO
- Use of sources and citations
- Special exam arrangements due to individual needs
- Withdrawal from an exam
- Illness at exams / postponed exams
- Explanation of grades and appeals
- Resitting an exam
- Cheating/attempted cheating
You will find further guides and resources at the web page on examinations at UiO.