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California Institute of Technology

Pricing Options with Mathematical Models

California Institute of Technology via edX


This is an introductory course on options and other financial derivatives, and their applications to risk management. We will start with discrete-time, binomial trees models, but most of the course will be in the framework of continuous-time, Brownian Motion driven models. A basic introduction to Stochastic, Ito Calculus will be given. The benchmark model will be the Black-Scholes-Merton pricing model, but we will also discuss more general models, such as stochastic volatility models. We will discuss both the Partial Differential Equations approach, and the probabilistic, martingale approach. We will also cover an introduction to modeling of interest rates and fixed income derivatives.

I teach the same class at Caltech, as an advanced undergraduate class. This means that the class may be challenging, and demand serious effort. On the other hand, successful completion of the class will provide you with a full understanding of the standard option pricing models, and will enable you to study the subject further on your own, or otherwise. You should have a working knowledge of basic calculus, statistics, and probability and be interested in the use of mathematical modeling. Please go to Unit 0 in the Course Outline to take the prerequisites assessment.

Taught by

Jaksa Cvitanic


5.0 rating, based on 2 Class Central reviews

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  • Daniel Chan
    The professor is great, and explained things in a much clearer fashion on the subject matter than anyone that I have taken. that includes my own masters degree. I highly recommend this course if you are interested in quantitive finance, the course is tough and is a typical that you would see in a masters in financial engineering program. I have been looking for more courses like this, but this stands out as one of the best.
  • John Walsh

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