Advanced Financial Models

Advanced Financial Models	Michael Tehranchi
Michaelmas 2012

11-12 Mon, Wed, Fri in MR5

The official course description

Lecture notes

Here are notes for the course.

Example sheets

Example sheet 1 and solutions
Example sheet 2 and solutions
Example sheet 3 and solutions
Example sheet 4 and solutions

Examples classes

The fourth examples class will be arranged in January..

Supplemental reading

Here is a (very incomplete) list of textbooks on financial mathematics. Nearly every topic in Advanced Financial Models is also discussed in at least one of these books.

M. Baxter and A. Rennie. Financial Calculus: An Introduction to Derivative Pricing. Cambridge University Press. 1996
T. Bjork. Arbitrage Theory in Continuous Time. Oxford Unversity Press. 2004.
M. Capinski and T. Zastawniak. Mathematics for Finance: An Introduction to Financial Engineering. Springer. 2003
R.J. Elliott and P.E. Kopp. Mathematics of Financial Markets. Springer. 2001
D. Kennedy. Stochastic Financial Models. CRC Press. 2010
D. Lamberton and B. Lapeyre. Introduction to Stochastic Calculus Applied to Finance. CRC Press. 1996
M. Musiela and M. Rutkowski. Martingale Methods in Financial Modelling. Springer. 2006
S.E. Shreve. Stochastic Calculus for Finance: Vol. 1 and 2. Springer. 2004
R.J. Williams. Introduction to the Mathematics of Finance. American Mathematical Society. 2006

Several of the books above (and the AFM lecture notes) contain introductions to stochastic calculus applied to finance. Those interested in learning more stochastic calculus and its applications to science, engineering, and other branches of mathematics are encouraged to attend the Stochastic Calculus Part III course in Lent term. Here are some classic books:

I. Karatzas and S. Shreve. Brownian Motion and Stochastic Calculus. Springer. 1998
D. Revuz and M. Yor. Continuous Martingales and Brownian Motion. Springer. 2001.
L.C.G. Rogers and D. Williams. Diffusions, Markov Processes, and Martingales: Vol. 1 and 2. Cambridge University Press. 2002.

Finally, here are some books on probability theory at the level encountered in this course.

G. Grimmett and D. Stirzaker. Probability and Random Processes. Oxford University Press. 2001
D. Williams. Probability with Martingales. Cambridge University Press. 1991

Interesting links

The probability seminar.

The finance workshop.

Advice for PhD applicants in financial mathematics in Cambridge.

Employment contacts

For those interested in employment in a bank or hedge fund, here is a list of people to contact.

Last updated 26 Dec 2012.