MTH5560 Partial differential equations for finance
Faculty of Science
MTH5560 Partial differential equations for finance is a level 5, 6-credit-point, postgraduate unit from the Faculty of Science, offered in 2023 in Semester 2 at Clayton. It has no prerequisites.
- Credit points
- 6
- Offered in 2023
- Semester 2
- Clayton
- Assessment
- Exam 60%
- and 1 other task
This is the 2023 handbook entry. See the 2027 entry.
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Requisites
Before MTH5560
No prerequisites or corequisites besides the enrolment rules below.
After MTH5560
No unit lists MTH5560 as a prerequisite in the 2023 handbook.
Enrolment rules
PREREQUISITE: MTH3251 or equivalent
COREQUISITE: Enrolment in the Master of Financial Mathematics or the Master of Mathematics
Overview
This unit introduces parabolic partial differential equations (PDEs) with financial applications. Basic solutions concepts and properties will be covered. Connections between PDE and probabilistic formulations will be established via the Feynman-Kac formula. Option pricing theory will be explored via the Black-Scholes equation, Dupire’s equation and Fokker-Planck equation for various models including local volatility and stochastic volatility models, with extensions to lookback, Asian, basket, Bermudan and American options. The dynamic programming principle and theory of stochastic control will be briefly introduced. You will learn to derive relevant PDEs for financial problems and solve them using analytical or numerical methods.
Offerings in 2023
| Teaching period | Campus | Mode |
|---|---|---|
| Second semester | Clayton | On campus |
Assessment
- Continuous assessmentOther40%
- Examination (3 hours and 10 minutes)ExamThreshold hurdle60%
Learning outcomes
When you finish this unit, you should be able to:
- 1
Articulate specialised mathematical concepts within the field of partial differential equations;
- 2
Recognise the complex connections between stochastic analysis and partial differential equations;
- 3
Apply sophisticated mathematical modelling skills to problems in partial differential equations that relate to financial markets;
- 4
Demonstrate critical thinking and problem solving skills within the context of financial mathematics;
- 5
Formulate expert solutions, both analytical and numerical, to practical financial problems using specialised cognitive and technical skills within the field of partial differential equations;
- 6
Communicate complex information in an accessible format to a non-mathematical audience.
Workload and teaching
- Applied sessions11 hours
- Seminars36 hours
- Teaching approachActive learning
- 3 hours of seminars;
- One hour of applied classes and
- 8 hours of independent study per week (including working on assessments and revision)
Active learning will occur in lectures and applied sessions.
Contacts
- Unit Coordinators
- Dr Ivan Guo
- Chief Examiners
- Dr Kihun Nam
Common questions
What are the prerequisites for MTH5560?
MTH5560 has no prerequisites, but enrolment rules apply.
When is MTH5560 offered?
In 2023, MTH5560 runs in Semester 2 at Clayton.
Does MTH5560 have an exam?
Yes. The exam is worth 60% of the final mark, alongside 1 other task.