MATH40770 Adv Financial Models (online)

Academic Year 2021/2022

The aim of this module is to apply the methods of stochastic calculus to no-arbitrage theory, interest-rate modelling and applications to pricing. Topics include: a review of Black-Scholes option pricing and the change of measure technique; bonds and interest rates (bank account and short rates, zero coupon bonds and interest rate curves, coupon bonds, swap and yields, yield and duration); multi-dimensional Itô calculus (review of 1-dimensional case, multi-dimensional Itô formulae, correlated Wiener processes); martingale models for the short rate (one- and two-factor short-rate models, classical time-homogeneous short rate models e.g. Vasicek and Dothan models, Hull-White extended Vasicek model, two-additive-factor Gaussian model G2++); forward rate models and market models (forward rate models e.g. Heath-Jarrow-Morton framework, market models e.g. the LIBOR market model).

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Curricular information is subject to change

Learning Outcomes:

On successful completion of this module, the student is expected to be able to understand the definitions, theorems and examples covered in all of the topics listed above, and carry out associated computations.

Student Effort Hours: 
Student Effort Type Hours
Autonomous Student Learning


Online Learning




Approaches to Teaching and Learning:
Lectures, tutorials, enquiry and problem-based learning. 
Requirements, Exclusions and Recommendations
Learning Requirements:

It is necessary for the student to have taken MATH40780.

Module Requisites and Incompatibles
MATH40740 - Advanced Financial Models

Assessment Strategy  
Description Timing Open Book Exam Component Scale Must Pass Component % of Final Grade
Examination: Written examination. 2 hour End of Trimester Exam No Standard conversion grade scale 40% No


Continuous Assessment: Continuous assessment. Throughout the Trimester n/a Standard conversion grade scale 40% No


Carry forward of passed components
Resit In Terminal Exam
Autumn Yes - 2 Hour
Please see Student Jargon Buster for more information about remediation types and timing. 
Feedback Strategy/Strategies

• Group/class feedback, post-assessment

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