ACT 460 / STA 2502 – Stochastic Methods for Actuarial ScienceClass Photo :Important:
Location and TiMe:Where: Lash Miller 162 The first class will be held on Tuesday Sept 12, 2006. Outline:This course is an introduction to the stochastic models used in Actuarial Science at the interface of Finance. Students will be exposed to the basics of stochastic calculus, particularly focusing on Brownian motions and simple stochastic differential equations. The role that martingales play in pricing of derivative instruments will be investigated. Some exotic equity derivative products will be explored together with stochastic models for interest rate derivatives. The course will cover most of chapters 18-25 of Mc Donald. Additional topics will be included based on class interest and time. Class Notes / Lectures :Please not that all Excel projects are for illustrative and educational purposes only!
*Here is the setup file for the Excel sheets for the binomial model, the trinomial model and a portfolio of basic options. This setup will create a new folder in your start menu called Tyrico, run the register.cmd file before opening any Excel sheet. You must have macros enabled (at a minimum set to medium security under Tools -> Macros -> Security). Also, you must have the .NET framework version 1.1 installed - a free download from Microsoft. Problem Sets :Problem sets will be handed out on a biweekly basis; however, only one or two questions will be graded. You are strongly encouraged to carry out the exercises in Mc Donald as preparation for the problem sets which will be more involved than those in the course text. You can find student resources for the course text (solutions and more sample problems) from the publisher's student resource or the book resource. Problem Set 1 - Problem Set 1 Solutions - PS1Q2.xls Problem Set 2 - Problem Set 2 Solutions - PS2Q3.xls Term Test Solutions - Term Test Grade Histogram Problem Set 3 - Problem Set 3 Solutions Problem Set 4 - Problem Set 4 Solutions Textbook:The required textbook for this course is
You can find student resources for the course text (solutions and more sample problems) from the publisher's student resource or the book resource. Grading Scheme:The final grade for undergraduate students will be based on an exam ( 50% ), a term test ( 30% ), and problem sets ( 20% ):
The final grade for graduate students will be based on an exam ( 30% ), a term test ( 30% ), problem sets ( 20% ) and a final project ( 20% ):
Tutorials:Your TA is Georg Sigloch, a Ph.D. student in the Department of Mathematics. Georg is working on research problems in Mathematical Finance, specifically on indifference valuation for defaultable claims. Office Hours:The office hours are yet to be determined.
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