The website for this course is on Moodle.
The only materials that are required for this course are the lecture notes, which will be made available on Moodle in a timely manner.
The lecture notes are influenced by a wide variety of sources. The following is a list of some of those sources, and could be considered extra reading if the student needs more detail on a particular subject.
Aksamit, A., & Jeanblanc, M. (2017). Enlargement of filtration with finance in view. Switzerland: Springer.
Bachelier, L. (1900). Théorie de la spéculation. In Annales scientifiques de l'École normale supérieure (Vol. 17, pp. 21-86).
Bates, D.S., 1996, “Jumps and Stochastic Volatility: Exchange Rate Processes Implicit in Deutsche Mark Options,” Review of Financial Studies, (Spring) Vol. 9, No. 1, 69-107.
Baxter, M. and Rennie, A., 1996, Financial Calculus: An Introduction to Derivative Pricing, Cambridge University Press.
Bielecki, T.R. and Rutkowski, M., 2002, Credit Risk: Modeling, Valuation and Hedging, Springer Finance.
Black, F. and Cox, J.C., 1976, “Valuing Corporate Securities: Some Effects of Bond Indenture Provisions,” Journal of Finance, 31 (May), 351-368.
Black, F., and Scholes, M., 1973, “The Pricing of Options and Corporate Liabilities,” Journal of Political Economy, 81 (May-June), 637-654.
Bhar, R., & Chiarella, C. (1997). Transformation of Heath-Jarrow-Morton models to Markovian systems. The European Journal of Finance, 3(1), 1-26.
Bjerksund, P., & Stensland, G. (2014). Closed form spread option valuation. Quantitative Finance, 14(10), 1785-1794.
Brace, A., Gatarek, D., & Musiela, M. (1997). The market model of interest rate dynamics. Mathematical finance, 7(2), 127-155.
Brennan, M. and Schwartz, E., 1985, “Evaluating Natural Resource Investments,” Journal of Business, 58, 135-157
Brigo, D. and Mercurio, F. 2006, Interest Rate Models—Theory and Practice: With Smile, Inflation and Credit, 2nd Ed., Springer Finance.
Buchen, P.W., 2001, “Image Options and the Road to Barriers,” Risk Magazine, 14 (9), 127-130.
Buchen, P.W., 2012, An Introduction to Exotic Option Pricing, Chapman & Hall.
Caouette, Altman, and Narayanan, 1998, Managing Credit Risk: The Next Great Financial Challenge, Wiley.
Carr, P., & Madan, D. (1999). Option valuation using the fast Fourier transform. Journal of computational finance, 2(4), 61-73.
Chen, R. R., Cheng, X., Fabozzi, F. J., & Liu, B. (2008). An explicit, multi-factor credit default swap pricing model with correlated factors. Journal of Financial and Quantitative Analysis, 43(1), 123.
Chiarella, C., & Kwon, O. K. (2001). Forward rate dependent Markovian transformations of the Heath-Jarrow-Morton term structure model. Finance and Stochastics, 5(2), 237-257.
Colwell, D.B., Feldman, D. and Hu, W., 2015, “Non-Transferable Non-Hedgeable Executive Stock Option Pricing,” Journal of Economic Dynamics and Control, Vol. 53, April, pp. 161-191.
Colwell, D.B., Henker, T., Fong, K., and Ho, J., 2003, “Real Options Valuation of Australian Gold Mines and Mining Companies.” The Journal of Alternative Investments, 23-38.
Chung, K.L., 1974, A Course in Probability Theory, 2nd Ed., Academic Press.
Cochrane, J.H., 2001. Asset Pricing, Princeton University Press.
Cont, R. and Tankov, P., 2008, Financial Modelling with Jump Processes, 2nd Ed., Chapman and Hall.
Cox, J. C., & Huang, C. F., 1989, “Optimal consumption and portfolio policies when asset prices follow a diffusion process,” Journal of economic theory, 49(1), 33-83.
Cox, J.C., Ingersoll, J.E., and Ross, S.A., 1985, “A Theory of the Term Structure of Interest Rates,” Econometrica, 53, 385-407.
Cvitanić, J., and Karatzas, I., 1992, “Convex Duality in Constrained Portfolio Optimization,” Annals of Applied Probability, 2(4), 767-818.
Dempster, M., Medova, E., and Tang, K. (2008). Long term spread option valuation and hedging. Journal of Banking & Finance, 32(12):2530-2540.
Dixit, R. K., & Pindyck, R. S. (2012). Investment under uncertainty. Princeton university press.
Duffie, D., Pan J., and Singleton, K., 2000, “Transform Analysis and Asset Pricing for Affine Jump-Diffusions,” Econometrica, 1343-1376.
Elliott, R.J., 1982, Stochastic Calculus and Applications, Springer.
Elliott, R.J., Aggoun, L., and Moore, J.B., 1995, Hidden Markov Models: Estimation and Control, Springer.
Harrison, J.M., and Pliska, S., 1981, “Martingales and Stochastic Integrals in the Theory of Continuous Trading,” Stochastic Processes and their Applications, 11, 215-260.
Heath, D., Jarrow, R.A. and Morton, A., 1992, “Bond Pricing and the Term Structure of Interest Rates: A New Methodology for Contingent Claims Valuation,” Econometrica, 60, 77-105.
Heston, S.L., 1993, “A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options”, Review of Financial Studies, 6, 327-343.
Ho, T.S.Y., and Lee, S.-B., 1986, “Term Structure Movements and the Pricing of Interest Rate Contingent Claims,” The Journal of Finance, 41, 1011-1029.
Hull, J.C., 2017, Options, Futures, and Other Derivatives, 9th Ed., Pearson.
Hull, J. and White, A., 1990, “Pricing Interest Rate Derivative Securities,” The Review of Financial Studies, 3, 573-592.
Jacod, J. and Shiryaev, A.N., 1987, Limit Theorems for Stochastic Processes, Springer.
Karatzas, I., and Kou, S.G. (1996): “On the Pricing of Contingent Claims Under Constraints,” The Annals of Applied Probability, Vol. 6, No. 2, 321-369.
Karatzas, I., Lehoczky, J.P., Shreve, S.E., 1987. Optimal portfolio and consumption decisions for a “small investor” on a finite horizon. SIAM Journal on Control and Optimization 25 (6) 1557-1586. Doi: 10.1137/0325086
Karatzas, I. and Shreve, S.E., (I) 1991, Brownian Motion and Stochastic Calculus, 2nd Ed., Springer.
Karatzas, I. and Shreve, S.E., (II) 1998, Methods of Mathematical Finance, Springer.
Kirk, E., & Aron, J. (1995). Correlation in the energy markets. Managing energy price risk, 1, 71-78.
Konstandatos, O., 2008, Pricing Path Dependent Exotic Options: A Comprehensive Mathematical Framework, VDM Verlag Dr. Mueller e.K.
Lee, R. W. (2004). Option pricing by transform methods: extensions, unification and error control. Journal of Computational Finance, 7(3), 51-86.
Leland, H.E., 1994, “Corporate Debt Value, Bond Covenants, and Optimal Capital Structure,” Journal of Finance, 49, No. 4, (Sept), 1213-1252.
Liptser, R.S. and Shiryaev, A.N 1977, Statistics of Random Processes I: General Theory, Springer-Verlag.
Lord, R., & Kahl, C. (2007). Optimal Fourier inversion in semi-analytical option pricing. (papers.ssrn.com)
Margrabe, W. (1978). The value of an option to exchange one asset for another. The journal of finance, 33(1), 177-186.
Merton, R. C., 1973, "An intertemporal capital asset pricing model." Econometrica: Journal of the Econometric Society, 867-887.
Merton, R.C., 1974, “On the Pricing of Corporate Debt: The Risk Structure of Interest Rates,” Journal of Finance, 29, 449-470.
Merton, R.C., 1990, Continuous-Time Finance, Blackwell.
Musiela, M., & Rutkowski, M. (1997a). Continuous-time term structure models: Forward measure approach. Finance and Stochastics, 1(4), 261-291.
Musiela, M. and Rutkowski, M., (1997b), Martingale Methods in Financial Modelling, Springer.
Øksendal, B. (2003). Fractional Brownian motion in finance. Preprint series. Pure mathematics http://urn. nb. no/URN: NBN: no-8076.
Oksendal, B. (2013). Stochastic differential equations: an introduction with applications. Springer Science & Business Media.
Pikovsky, I., & Karatzas, I. (1996). Anticipative portfolio optimization. Advances in Applied Probability, 1095-1122.
Protter, P.E., 2005, Stochastic Integration and Differential Equations, Springer.
Revuz, D., and Yor, M., 1999, Continuous Martingales and Brownian Motion, 3rd Ed., Springer.
Rogers, L.C.G. and Williams D., 1994, Diffusions, Markov Processes and Martingales, Vol. 2: Ito Calculus, Cambridge University Press.)
Ross, S.M., 1980, Introduction to Probability Models, 2nd Ed., Academic Press.
Rouah, F. D. (2013). The Heston model and its extensions in Matlab and C. John Wiley & Sons.
Royden, H.L., 1968, Real Analysis, 2nd Ed., MacMillan.
Schachermayer, W., & Teichmann, J. (2008). How close are the option pricing formulas of Bachelier and Black–Merton–Scholes?. Mathematical Finance: An International Journal of Mathematics, Statistics and Financial Economics, 18(1), 155-170.
Schönbucher, 2003, Credit Derivatives Pricing Models: Models, Pricing and Implementation, Wiley Finance.
Schwartz, E., and Smith, J. E., 2000, “Short-term variations and long-term dynamics in Commodity Prices,” Management Science, 46(7), 893-911.
Shreve, S.E., 2004, Stochastic Calculus for Finance II, Springer.
Stein, E.M., and Stein, J.C., 1991, “Stock Price Distributions with Stochastic Volatility: An Analytic Approach,” Review of Financial Studies, Vol. 4, No. 4, 727-752.
Suchard, J. A. (2005). The use of stand alone warrants as unique capital raising instruments. Journal of Banking & Finance, 29(5), 1095-1112.
Vasicek, O.A., 1977, “An Equilibrium Characterization of the Term Structure,” Journal of Finance, 5, 177-188.
Wong, B., and Heyde, C.C., 2006, “On Changes of Measure in Stochastic Volatility Models,” Journal of Applied Mathematics and Stochastic Analysis, 1-13.