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Unit of study_

MATH3975: Financial Derivatives (Advanced)

2025 unit information

This unit will introduce you to the mathematical theory of modern finance with the special emphasis on the valuation and hedging of financial derivatives, such as: forward contracts and options of European and American style. You will learn about the concept of arbitrage and how to model risk-free and risky securities. Topics covered by this unit include: the notions of a martingale and a martingale measure, the fundamental theorems of asset pricing, complete and incomplete markets, the binomial options pricing model, discrete random walks and the Brownian motion, the Black-Scholes options pricing model and the valuation and hedging of exotic options. Students completing this unit have been highly sought by the finance industry, which continues to need graduates with quantitative skills. Students enrolled in this unit at advanced level will have to undertake more challenging assessment tasks, but lectures in the advanced level are held concurrently with those of the corresponding mainstream unit.

Unit details and rules

Managing faculty or University school:

Science

Study level Undergraduate
Academic unit Mathematics and Statistics Academic Operations
Credit points 6
Prerequisites:
? 
A mark of 65 or above in 12cp from (MATH2XXX or STAT2XXX or DATA2X02)
Corequisites:
? 
None
Prohibitions:
? 
MATH3933 or MATH3015 or MATH3075
Assumed knowledge:
? 
None

At the completion of this unit, you should be able to:

  • LO1. Demonstrate familiarity with fundamental concepts in the area of financial markets with application to existing securities related to equities and interest rates.
  • LO2. Develop stochastic models and solve qualitative and quantitative problems associated with the valuation and hedging of options.
  • LO3. Understand, explain and apply the principles of stochastic modelling in the context of financial markets.
  • LO4. Understand, explain and apply the principles of optimal stopping in the context of American-style options.
  • LO5. Understand, explain and apply the principles of Dynkin games in the context of game options.
  • LO6. Understand and apply the Black-Scholes continuous-time model for European-style options.
  • LO7. Apply mathematical expertise to solve practical problems using various approaches in discrete and continuous time.​

Unit availability

This section lists the session, attendance modes and locations the unit is available in. There is a unit outline for each of the unit availabilities, which gives you information about the unit including assessment details and a schedule of weekly activities.

The outline is published 2 weeks before the first day of teaching. You can look at previous outlines for a guide to the details of a unit.

Session MoA ?  Location Outline ? 
Semester 2 2024
Normal day Camperdown/Darlington, Sydney
Session MoA ?  Location Outline ? 
Semester 2 2025
Normal day Camperdown/Darlington, Sydney
Outline unavailable
Session MoA ?  Location Outline ? 
Semester 2 2020
Normal day Camperdown/Darlington, Sydney
Semester 2 2021
Normal day Camperdown/Darlington, Sydney
Semester 2 2021
Normal day Remote
Semester 2 2022
Normal day Camperdown/Darlington, Sydney
Semester 2 2022
Normal day Remote
Semester 2 2023
Normal day Camperdown/Darlington, Sydney

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Modes of attendance (MoA)

This refers to the Mode of attendance (MoA) for the unit as it appears when you’re selecting your units in Sydney Student. Find more information about modes of attendance on our website.

Important enrolment information

Additional advice

MATH2X70 and MATH3975 may be taken in the same semester