The course provides a modern portfolio theory and a basic option pricing theory. First, we prepare mathematical preliminaries. In particular, we deal with a basic concept of a probability theory. Second, we study a modern portfolio theory. Topics covered in this section include the mean-variance portfolio analysis, the CAPM. Finally, a basic theory of option pricing models is discussed by dealing with one-period binomial option pricing models. Especially, we study meanings of important terms, for example “arbitrage”, “hedging”, “martingale probability” and so on. The course also covers the presentation of Mathematica implementation of the model used in Finance.
Midterm Exam 25％, Final Exam 50％, Homework 25％