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Advanced Investment Theory

 MEIE786 Advanced Investment Theory: Syllabus


 Date : Tuesday and Thursday 15:30-16:45

Lecture room : 4th Science building, Room 405

Lecturer : Bong-Gyu Jang

    (4th Science building, Tel: 279-2372,

Office hour : Tuesday and Thursday 16:45-18:00.

The objective of this course is to introduce the recent topics about the discrete and continuous-time finance to the students. For this, we explore:

    1. Financial markets and products

    2. Probability theory and stochastic differential equations (SDEs)

    3. Financial modeling and Option pricing theory,

    4. Portfolio theory focusing on Markowitz and Merton's theories.

※ The prerequisite for this course: none (self-contained)

※ Grading policy : exam(once) 40%, homework(announced during the classes, 3-4 times) 30%, class participation 10%, term project(and Presentation) 20%

※ Expected schedule


week subject references
1 Financial markets and products (1) [BKM] Chapter 1-2
2 Financial markets and products (2)
3 Discrete-time option pricing [WHD] Part One and Three,

[Oks], and [Wil]

4 Probability theory and SDEs
5 Black-Scholes model (1)
6 Black-Scholes model (2)
7 American options
8 Commodity Modeling and CO2 Emission Trading
9 Discrete-time portfolio theory (1) [BKM] Chapter 6-8
10 Discrete-time portfolio theory (2)
11 Dynamic programing principle [Oks] Chapter 11
12 Dynamic programing principle
13 Continuous-time portfolio theory (1) [Mer] Chapter 4-5
14 Continuous-time portfolio theory (2)
15 Exam / Project Presentation (I)  
16 Project Presentation (II)  

[BKM] Z. Bodie, A. Kane, and A.J. Marcus, Investments, 8th Ed. (International), McGraw Hill.

[Mer] R.C. Merton, Continuous-time Finance, Blackwell Publishing.

[Oks] B. Oksendal, Stochastic Differential Equations: An Introduction with Applications (6th Ed.), Springer, 2007

[Wil] D. Williams, Probability with Martingales, Cambridge Univ. Press, 1991

[WHD] P. Wilmott, S. Howison, and J. Dewynne, The Mathematics of Financial Derivatives: A student introduction, Cambridge univ. press, 1995