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21420 ContinuousTime Finance Spring: 9 units This course begins with Brownian motion, stochastic integration,and Ito's formula from stochastic calculus. This theory is used to develop the BlackScholes option pricing formula and the BlackScholes partial differential equation. Additional topics may include models of credit risk, simulation, and expected utility maximization. 3 hours lecture. Prerequisites: 21260 and 21370 and a calculus based probability course, 21325, 36225 or 36217, is also required as a prerequisite and is usually taken before 21370. 70207 is not sufficient preparation in probability for this course. 21420 is a prerequisite for 45816 Studies in Financial Engineering.
