The course, which is the sequel to Introduction to finance, deals with an option pricing theory and its exercises. First of all, two-period binomial models are discussed. Moreover, we extend them to multi-period binomial models. Next, in order to learn the Black-Sholes model, we prepare several topics of a probability theory, which include normal distribution, random walk, the central limit theorem, Brownian motion and a basic guide of stochastic differential equations (SDE). Finally, the Black-Sholes model and formula are introduced.
・Midterm Exam 25%, Final Exam 50%, Homework 25%