Math 441 Course Info

  • Course Meets: Tuesday, Thursday 11:15 am - 12:30 pm in LGRC A203

  • Instructor
    Michael Sullivan, LGRT 1544, 545-1909
    Office Hours: Tues 3-4, Weds 2-4

  • Prerequisites: Math 131, 132, Stat 240 or equivalent. Maybe partial derivatives (eg Math 233).

  • Credit: 3 credit hours

  • Required: A calculator with a "solver", say capable of numerically solving exp(x) + exp(3x) + ln(x/2) + x^4 = 17, for example. The calculator should have a cummulative distribution function for the standard normal variable (also known as the ``Erf" function). TI-83, for example, suffices.
    There will be no required text. Instead the class will use a set of lecture notes to be provided during the semester.

  • Recommended, but not required:
    Options, Futures and Other Derivatives by John C. Hull, 5th, 6th, or 7th edition, Prentice-Hall 2003, 2006, 2009.
    We will not use the Derivagem software package included in the text. The 6th edition is on reserve at the library. Below are some links for buying the text at reduced price:
    bookzilla.com , economicaltextbooks.com , half.com , amazon.com , Barnes and Nobles.

  • Overview: This course is an introduction to the mathematical models used in finance and economics with particular emphasis on models for pricing financial instruments, or "derivatives," such as options and futures. The goal is to understand how the models derive from basic principles of economics, and to provide the necessary mathematical tools for their analysis. A secondary goal is to develop basic programming skills in Matlab, a language commonly used in the financial industry. Matlab is available free to the UMass community at OIT computer clusters.

  • Contents:
    Interest rates
    Matlab (introduction)
    Bonds
    Swaps
    Forwards
    Options (introduction)
    Discrete probability (reviewed)
    Mean Variance portfolio
    Pricing options (binomial trees)
    Continuous probability
    Pricing options (Black-Scholes formula)

  • Exams: The midterm will be in-class on Thursday March 12. There will be NO make-up midterm. The final exam time will be determined by the Registrar's office later this semester.

  • Grading: The grade for the course will be determined by timely-completion of homeworks well as the two exams. There MAY be several short in-class quizzes that will supplement the homework grade component. The lowest homework or quiz score will be dropped, if it's in your interest. But there will be NO excuses for late or missed homeworks (or quizzes). That's what the drop is for! There will be one homework almost every week. Homeworks will be due at the beginning of class on Thursdays, unless otherwise noted, while quizzes will be at the beginning of class on Tuesdays. Homeworks will include several Matlab modules. The homework scores and quiz scores (and maybe a couple of spot checks on attendance) will determine 35% of your grade. The homeworks will be more heavily weighed than the quizzes. The midterm will be worth 25 or 30%, and the final exam will be worth 35 or 40%. However, if you miss more than one third of your homeworks and/or quizzes (drops won't help you here), you'll be penalized by 2/3 of a letter grade; e.g., B+ to B- or C- to D. (I do not assign D+ or D- as a grade.) There will be no make-up or extra-credit work.