37007 Probability Theory and Stochastic Analysis8cp; 3hpw class (lecture/workshop, on campus), 3hpw independent learning
Requisite(s): 24 credit points of completed study in spk(s): STM91543 Core Subjects (Mathematics)
These requisites may not apply to students in certain courses. See access conditions.
Anti-requisite(s): 25875 Probability Theory and Stochastic Analysis
Stochastic modelling in financial applications relies on advanced techniques from probability theory and stochastic analysis that are used extensively for derivative pricing and hedging, interest rate modelling and risk management. This subject introduces students to many fundamental concepts and results required in financial applications. Due to diversity in students’ skills, students start from basic concepts and gradually move to advanced methodologies. This subject is illustrated with applications in R (and other languages) of modelling and simulation of random dynamics. Responding to an increasing need from industry, students demonstrate these techniques by solving a number of programming exercises in the assignment assessment task.
Detailed subject description.