Math 485 - Introduction to Mathematical Finance
Description
Math 485 is the first course in the Math Finance sequence: 485, 489, 490. Completion of all three courses awards the Math Finance certificate.
This course serves as an introductory course to derivative and options pricing. No previous financial knowledge is required to take this course. Intro to Math Finance is more computation-based than theoretical in content and exam structure, which contrasts from most of the Rutgers undergraduate math curriculum.
Topics covered
Topics usually covered in Math 485 include:
- Brownian motion
- Options and derivatives
- Risk neutral pricing (fundamental theorem of asset pricing)
- Itô calculus
- Black-Scholes PDE
- Option Greeks
- Binomial tree model
Note that the exact list of topics may vary by instructor and semester.
Comments on prerequisites
Unofficial/suggested additional prerequisites: Math 481.
Previous students have mentioned that 481 can help with better understanding of course content, though it is not required to learn the topics. Additionally, certain topics in measure theory can be useful in understanding the theoretical basis of the course, though a full measure theory course (such as 501) is definitely not necessary. It is most important that students have a strong grasp of probability.
Resources
Textbook
The use of textbooks is professor dependent. When taught by Triet Pham, there is no official textbook.
Additional materials
The following resources may be helpful to 485 students.
- Hull, Options, Futures and Other Derivatives.
- Capinski and Zastawniak, Mathematics for Finance (electronic copy available through Rutgers University Libraries).
- Ross, An Elementary Introduction to Mathematical Finance.
- Stampfli and Goodman, Mathematics of Finance.
- Turner, Stochastic Finance.