BFF5340 Guidance on MST topics
金融mid代考 Understand the Geometric Brownian Motion process for stock prices and its implication for future stock prices and stock returns.
In preparation for the Mid-Semester test you should be able to perform the following: 金融mid代考
● Understand the Geometric Brownian Motion process for stock prices and its implication for future stock prices and stock returns.
● Understand the meaning of Ito’s Lemma and the BSM PDE, and the meaning of their components. Note, you do not need to prove these results.
● Understand the theories of no-arbitrage and risk-neutral valuation methods and their equivalence.
● Understand the assumptions of the BSM model and the binomial model.
● Price European puts and calls on stocks via no-arbitrage and risk-neutral valuation methods using the binomial tree of CRR.
● Price European puts and calls on stocks using the BSM model.
● Understand and explain the components of the BSM model.
● Be able to solve for the implied BSM volatility using Excel.
Questions will be drawn from lectures 1 to 3 inclusive, so more advanced topics after week 3 will not be included.
