Print Course syllabus
Course syllabus - Introduction to Financial Mathematics
Scope
7.5 credits
Course code
MAA303
Valid from
Autumn semester 2026
Education level
First cycle
Progressive Specialisation
G1F (First cycle, has less than 60 credits in first-cycle course/s as entry requirements)
Main area(s)
Mathematics/Applied Mathematics, Economics
Organisation
Department of Business and Mathematics
Ratified
2013-02-01
Revised
2025-11-03
Literature lists
Course literature is preliminary up to 8 weeks before course start. Course literature can be valid over several semesters.
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Books
Options, futures, and other derivatives
ISBN-10: 1-292-21289-6; ISBN-13:978-1-292-21289-0
ISBN: 9781292212920
Reference Literature
An Elementary Introduction to Mathematical Finance, Cambridge University Press, latest edition.
Other Materials
Additional lecture notes will be used in the course.
Objectives
The aim of this course is to provide an understanding of financial instruments with a focus on financial derivatives and give knowledge in evaluating and pricing of the most common financial derivatives like forwards, futures and options.
Learning outcomes
At the end of the course the student is expected to be able to
- describe the notions of forward contracts, futures contracts, options, interest rates, bonds and explain the arbitrage relations.
- evaluate forwards and futures and calculate bounds on options using simple arbitrage relations.
- build the Binomial model for asset prices and apply this model for European and American option pricing.
- perform arbitrage-pricing and perform risk-neutral valuation for options.
- explain the basic idea of the Black-Scholes model and use Black-Scholes formula to price.
Course content
Introduction to derivative securities. Interest rates and bonds. Present value and future value. European and American options. Simple arbitrage relations for forwards, futures and options. Elementary discrete probability theory. Asset price dynamics. Multi-period Binomial pricing model. Pricing contracts via no-arbitrage principle. Risk-neutral valuation. Normal distribution. Geometrical Brownian motion and modeling asset price processes. Black-Scholes model and Black-Scholes option pricing formula.
Specific requirements
Single Variable calculus 7.5hp and either Financial Accounting 7,5hp or 7,5hp in economics or corresponding.
Examination
Continuous examination and quizzes (PRO1), 3 credits, marks Pass (G)
Seminars (SEM1), 1.5 credits, marks Pass (G)
Written examination (TEN1), 3 credits, marks Pass (G) or Pass with distinction (VG)
A student who has a certificate from MDU regarding disability study support, can request adaptions for the examination. It is the examiner who takes decisions on any adaptions, based on the certificate and other conditions.
Grade
Three-grade scale