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Models for Financial Economics ACMA 440 (3)
Advanced actuarial models and their application to insurance and financial risks. Introduction to stochastic calculus: Ito's lemma, risk neutrality. Fundamental theorems of asset pricing. Black-Scholes-Merton partial differential equations. Exotic options. Monte Carlo methods. Advanced option pricing models. Implied volatility. Actuarial applications. Covers part of the syllabus for Exam IFM of the Society of Actuaries and Exam 3F of the Casualty Actuarial Society. Prerequisite: ACMA 340 with a minimum grade of C. Quantitative.