Announcement

• It will start from week 1 that the pdf's of course notes etc will be uploaded sequentially, accessed by codes.
• IMPORTANT DATE: Midterm 1 at Feb 2 (M), Midterm 2 at March 16(M)
• Please hand in the assignment in the assignment box opposite to Rm 222 LSB.
• The tutorials will start from Jan 12 (Monday) and tutorial notes will be uploaded after class.
• IMPORTANT: NO MAKE-UP for any midterm. If you a valid medical proof of sickness, then the instructor will give an average over the score of other parts performance.
• IMPORTANT: Assignment 1 Q1: "two" European options instead of "one".
• Prof. Chan's LN of Chapter 5 6 7 have been uploaded.
• Course Progress: Part I is finished at 01.28
• Course Progress: Part II is finished at 02.16
• IMPORTANT: Assignment 2 Q4: Just need to consider put option; Q6a: E(uX) instead of E(miu X)
• Midterm 1 (Mean: 21.07, STDEV: 6.64)
• COURSE ADJUSTMENT: due to time-limit, we skip the numerical part.
• Assignment 3: Question 5 typo dXt is the differential form of an ito process Xt
• IMPORTANT DATE: Final exam at May 4 (Mon) 9:30-11:30 at Univ Gymn
• Midterm 2 (Mean: 20.28, STDEV: 7.10)
• The pdf files of this course page will be removed after the final exam.

General Information

Lecturer

• Shieh Narn-Rueih
  • Office: LSB 233
  • Tel: 39437956
  • Email:
  • Office Hours: MW 2:30-3:30 pm

Teaching Assistant

• Chen Teng
  • Office: LSB 222B
  • Tel: 39437963
  • Email:
• Lam Ka Chun
  • Office: LSB 222B
  • Tel: 39437963
  • Email:

Time and Venue

• Lecture: Mon. 13:30-14:15, LSB LT2; Wed. 10:30-12:15, LSB LT2
• Tutorial: Mon. 12:30-13:15, LSB LT2

Course Description

In this course, we address the following topics: I. Some financial (derivatives, options, interest rates, forwards/features, portfolios, etc) background. II. Some stochastic tools. III. The Black-Scholes Model. IV. Two numerical methods. V. Some extensions of the BS Model.

Textbooks

• Raymond Chan: CUHK LN for 4210 FM.
• John C. Hull: Options, Futures, and Other Derivatives, 8th Edition.

References

• S.E. Shreve: Stochastic Calculus for Finance, vol. I \& II, Springer 2004.
• M. Jeanblanc, M. Yor, and M. Chesney: Mathematical Methods for Financial Markets, Springer 2009.
• J.A. Yan: Introduction to Financial Mathematics (in Chinese) Sciences Press, Beijing, 2012.

Pre-class Notes

• Chapter 1 (Prof. Chan's Lecture Notes)
• Chapter 2
• Chapter 3
• Chapter 4
• Chapter 5
• Chapter 6
• Chapter 7
• Chapter 8
• Chapter 10
• Chapter 9

Lecture Notes

• course note 1: upload 01.07 removed 05.11
• course note 2: upload 01.21 removed 05.11
• course note 3: upload 01.21 removed 05.11
• course note 4 (normal RV): upload 02.04 removed 05.11
• course note 5 (WP): upload 02.11 removed 05.11
• course note 6 (SC): upload 02.11 removed 05.11
• course note 7 (BS1): upload 03.02 removed 05.11
• course note 8 (BS 2): upload 03.09 removed 05.11
• course note 9 (BS 3):upload 03.23 removed 05.11
• course note 10 (AmOp) upload 04.01 removed 05.11
• course note 11(time-dep BS) upload 04.15 removed 05.11

Tutorial Notes

• Tutorial 1 (revised)
• Tutorial 2
• Tutorial 3
• Tutorial 4
• Tutorial 5
• Tutorial 6
• Tutorial 7
• Tutorial 8
• Tutorial 9
• Tutorial 10
• Tutorial 11

Assignments

• Assignment 1
• Assignment 2 updated
• Assignment 3
• Assignment 4
• Assignment 5
• Assignment 6

Solutions

• Assignment 1 Suggested Solution
• Midterm 1 Suggested solution
• Assignment 2 Suggested Solution
• Assignment 3 Suggested Solution
• Assignment 4 Suggested Solution
• Midterm 2 Suggested solution
• Assignment 5 Suggested Solution
• Assignment 6 Suggested Solution

Assessment Scheme

Useful Links

• The Formula That Killed Wall Street

Honesty in Academic Work

The Chinese University of Hong Kong places very high importance on honesty in academic work submitted by students, and adopts a policy of zero tolerance on cheating and plagiarism. Any related offence will lead to disciplinary action including termination of studies at the University. Although cases of cheating or plagiarism are rare at the University, everyone should make himself / herself familiar with the content of the following website:

and thereby help avoid any practice that would not be acceptable.