This course features studies in derivative pricing theory and focuses on financial mathematics and its applications to various derivative products. A working knowledge of probability theory, stochastic calculus (see, for example, STA2502H), knowledge of ordinary and partial differential equations and familiarity with the basic financial instruments is assumed.

The tentative topics covered in this course include, but is not limited to: no-arbitrage and the fundamental theorem of asset pricing; binomial pricing models; continuous time limits; the Black-Scholes model; the Greeks and hedging; European, American, Asian, barrier and other path-dependent options; short rate models and interest rate derivatives; convertible bonds; stochastic volatility and jumps; volatility derivatives; foreign exchange and commodity derivatives.