BU.232.650 – Continuous Time Finance –Instructor– Page 1 of 6

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Continuous Time Finance
2 Credits
BU.232.650.XX
[NOTE: Each section must have a separate syllabus.]
[Day &Time / ex: Monday, 6pm-9pm]
[Start & End Dates / ex: 3/24/17–5/12/17]
[Semester / ex: Spring 2017]
[Location / ex: Washington, DC]

Instructor

[Full Name]

Contact Information

[Email Address]

[Phone Number, ###- ###-#### (Optional)]

Office Hours

[Please specify the day and time of the 2 hours that will be dedicated to office hours each week. For evening classes, faculty may wish to hold their office hours by phone or email. While faculty are permitted to state “and by appointment,” office hours should not be held exclusively by appointment.]

Required Texts Learning Materials

The required materials for this course include a slide deck, and set of readings. These items, additional exercises and material will be provided on the Blackboard.

Text:The Concepts and Practice of Mathematical Finance by Mark S. Joshi, Cambridge University Press, Second or Latest Edition. The text is optional.

Optional Text: Investment Science by David G. Luenberger, Oxford University Press, Latest Edition.

Software: The course will involve use of Microsoft Excel 2010 (2013) and several Excel based applications and add-ins. The use of each tool will be discussed in class, but basic familiarity (such as copy and paste, working with formula, working with data analysis package to run regression) with Microsoft Excel is assumed.

The following programs and add-ins will be used in the course:

(a) Excel Solver: available as a part of Excel Add-in package.

(b) R (Optional).

Course Description

This course provides a conceptual understanding of the basic ideas in mathematical finance and show how these ideas are applied to practical situations, through the development and use of financial models. Mathematical abstractions are created which deal with issues including option pricing, risk neutrality,incomplete markets, stochastic volatility, and other responses to the realization of a variety of “unknowns.” Topics include Ito calculus, options theory, martingale pricing, interest rate derivatives, jump-diffusion processes, and variance gamma models.

Prerequisite(s)

None

Learning Objectives

By the end of this course, students will be able to:

  1. Identify key drivers in financial decisions.
  2. Develop analytical models prescription.
  3. Learn a variety of tools and techniques for a range of financial problems.
  4. Communicate the results and findings of their solutions to different audience groups and stakeholders.

To view the complete list of Carey Business School’s general learning goals and objectives, visit the Carey website.

Attendance
Attendance and class participation are part of each student’s course grade. Students are expected to attend all scheduled class sessions. Each class will include opportunities for teams to work together. Failure to attend class will result in an inability to achieve the objectives of the course. Excessive absence will result in loss of points for team participation. Regular attendance and active participation are required for students to successfully complete the course.

Assignments

Assignment / Learning Objective(s) / Weight
Class Participation / 4 / 15%
Homework/Case Assignments
Homework 1 (Group)
Homework 2 (Group) / 1,2,3 / 30%
(15%)
(15%)
Midterm Exam (Individual) / 1,2,3 / 25%
Project Presentation / 1,2,3,4 / 15%
Project Report / 1,2,3,4 / 15%
Total / 100%

Assignments are due one hour before the start of the class on the due date. Tardy submissions will not be accepted. Electronic submissions via the Blackboard Assignment tab are mandatory for all assignments, unless noted otherwise. Each assignment will be assigned approximately one week before it is due. If you have any questions about the graded assignments and would like a re-grade, you must contact the instructor within one week of the assignment being returned to you.

Homework Assignments (Group): There will be two homework assignments during the semester; more details about each assignment will be posted on Blackboard. All assignments need to be submitted via Blackboard unless specified otherwise.

Homework and Case Assignments:

  • Homeworkand case assignments will cover material that both helps students prepare for class and helps students prepare for the midterm exam and project work. Teams of three to four students may do the homework and caseassignments together. Only one submission is required by each team. You may form the teams on your own; in such case, you should notify instructor with the name of your team (e.g., Transformers, Team Gangnam Style, Gravitas) and the names and emails of all the team members. The maximum number of students allowed in a single team is 4. If you prefer to be assigned to a team by the instructor, you should notify instructor by the end of first session so that we can assign you to a team for your first assignment.
  • No discussion of the assignments is permitted outside your team until after the assignment has been submitted and/or discussed in class. You may contact the instructors with your questions.

Midterm Exam (Individual): Only under extenuating circumstances will we consider a make-up exam.

Final Project:The purpose of the course project is for you to explore how financial models and techniques learned in class can be applied to real business. The topic of the project is flexible. I suggest a few strategies, but they are not restrictive.

  • Consultant: Choose a local (or not) business where financialmodeling has potential. Investigate and analyze the level of analytics practiced in making financial decisions—if at all. Propose concrete strategies to develop and enhance these practices in the specific business context.
  • Financial Analyst: Choose a generic business (e.g.,investment firm, transport, media advertising, telecom). Gather information from a few companies in this business, and do a comparative study of the financial analytics practices and opportunities in this sector. Propose innovative strategies and discuss implementation.
  • Entrepreneur: Develop a business plan for a new company that provides or utilizes financial analytics and business solutions. Describe how you will make your business profitable and differentiate from competitors.

A presentation of the project to the class is scheduled for the last session. The project reports are due the last class day.

Grading

Effective Fall 2017: The grade of A is reserved for those who demonstrate extraordinarily excellent performance as determined by the instructor. The grade of A- is awarded only for excellent performance. The grades of B+, B, and B- are awarded for good performance. The grades of C+, C, and C- are awarded for adequate but substandard performance.The grades of D+, D, and D- are not awarded at the graduate level (undergraduate only). The grade of F indicates the student’s failure to satisfactorily complete the course work.

Please note that for Core and Foundation courses, a maximum of 25% of students may be awarded an A or A-; the grade point average of the class should not exceed 3.3. For Elective courses, a maximum of 35% of students may be awarded an A or A-; the grade point average of the class should not exceed 3.4. (For classes with 15 students or fewer, the class GPA cap is waived.)

Tentative Course CalendarThe instructors reserve the right to alter course content and/or adjust the pace to accommodate class progress. Students are responsible for keeping up with all adjustments to the course calendar.

Please do the following before coming to class on the stated day:

Week / Content / Reading / Deliverables
Textbook, notes / Cases
1 / a. Overview of Basic Probability Theory
b. Brownian and Geometric Brownian Motions / Text, Ch3
Optional Text, Ch 11
Notes will be posted on Blackboard
2 / a. Ito’s Lemma and it’s applications
b. Black-Scholes valuations
c. Dividend-paying assets / Text, Ch 5
Notes will be posted on Blackboard
3 / a. Basic Options Theory
b. Excel implementation of pricing stock options
c. Single and Multi-period Binomial options theory / Optional Text, Ch12
Notes will be posted on Blackboard
4 / a. Risk-neutral valuation
b. Martingale Pricing
c. Computational Methods for option prices / Text, Ch 6
Notes will be posted on Blackboard / HW 1
5 / a. Interest Rate Derivatives
b. Pricing applications: Bonds, Forwards, Futures / Text, Ch 13
Notes will be posted on Blackboard / Midterm Exam;
Project Proposals Last Date to Meet with the Professor
6 / a. Incomplete Markets
b. Jump-Diffusion Processes
c. Log-type models / Text, Ch 15
Notes will be posted on Blackboard
7 / a. Stochastic Volatility Smiles
b. Pricing options with Variance Gamma models / Text, Ch 16, 17
Notes will be posted on Blackboard / HW 2
8 / Project Presentations / Project Reports

Additional reading material may be posted from time to time.

Carey Business School

Policies and General Information

Blackboard Site

A Blackboard course site is set up for this course. Each student is expected to check the site throughout the semester as Blackboard will be the primary venue for outside classroom communications between the instructors and the students. Students can access the course site at Support for Blackboard is available at 1-866-669-6138.

Course Evaluation

As a research and learning community, the Carey Business School is committed to continuous improvement. The faculty strongly encourages students to provide complete and honest feedback for this course. Please take this activity seriously; we depend on your feedback to help us improve. Information on how to complete the evaluation will be provided toward the end of the course.

Disability Support Services

All students with disabilities who require accommodations for this course should contact Disability Support Services at their earliest convenience to discuss their specific needs. If you have a documented disability, you must be registered with Disability Support Services ( or 410-234-9243) to receive accommodations. For more information, please visit the Disability Support Services webpage.

Academic Ethics Policy

Carey expects graduates to be innovative business leaders and exemplary global citizens. The Carey community believes that honesty, integrity, and community responsibility are qualities inherent in an exemplary citizen. The objective of the Academic Ethics Policy (AEP) is to create an environment of trust and respect among all members of the Carey academic community and hold Carey students accountable to the highest standards of academic integrity and excellence.

It is the responsibility of every Carey student, faculty member, and staff member to familiarize themselves with the AEP and its procedures. Failure to become acquainted with this information will not excuse any student, faculty, or staff from the responsibility to abide by the AEP. Please contact the Student Services office if you have any questions. For the full policy, please visit the Academic Ethics Policy webpage.

Students are not allowed to use any electronic devices during in-class tests. Calculators will be provided if the instructor requires them for test taking. Students must seek permission from the instructor to leave the classroom during an in-class test. Test scripts must not be removed from the classroom during the test.

Student Conduct Code

The fundamental purpose of the Johns Hopkins University’s regulation of student conduct is to promote and to protect the health, safety, welfare, property, and rights of all members of the University community as well as to promote the orderly operation of the University and to safeguard its property and facilities. As members of the University community, students accept certain responsibilities which support the educational mission and create an environment in which all students are afforded the same opportunity to succeed academically. Please contact the Student Services office if you have any questions. For the full policy, please visit the Student Conduct Code webpage.

Student Success Center

The Student Success Center offers free online and in-person one-on-one and group coaching in writing, presenting, and quantitative courses. The center also offers a variety of workshops, exam study sessions, and instructor-led primer seminars to help prepare students for challenging course content, including statistics and accounting. For more information or to book an appointment, please visit the Student Success Center website.

Other Important Academic Policies and Services

Students are strongly encouraged to consult the Carey Business School’s Student Handbook and Academic Catalog and Student Resources for information regarding the following items:

  • Statement of Diversity and Inclusion
  • Inclement Weather Policy

Copyright Statement

Unless explicitly allowed by the instructor, course materials, class discussions, and examinations are created for and expected to be used by class participants only.The recording and rebroadcasting of such material, by any means, is forbidden. Violations are subject to sanctions under the Honor Code.