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Undergraduate Courses 21-420
Continuous-Time 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 Black-Scholes option pricing formula and the Black-Scholes partial differential equation. Additional topics may include models of credit risk, simulation, and expected utility maximization. 3 hours lecture.

Prerequisites: 21-260 and 21-370 and a calculus based probability course, 21-325, 36-225 or 36-217, is also required as a prerequisite and is usually taken before 21-370.

70-207 is not sufficient preparation in probability for this course.

21-420 is a prerequisite for 45-816 Studies in Financial Engineering.