Discrete Time Finance | Department of Mathematics

Discrete Time Finance

A Major Elective for B.Sc. (Research) Mathematics.

Credits (Lec:Tut:Lab)= 3:1:0 (3 lectures and 1 tutorial/lab weekly)

Prerequisites: MAT 184 Probability (MAT 390 Introduction to Mathematical Finance is recommended but is not a compulsory requirement.)

Overview: This course serves two purposes. On the one hand, it introduces various theoretical notions in the simpler setting of discrete time and sets the stage for continuous time finance. On the other, it has a strong computational aspect and the student learns to implement models using Excel or Matlab.

Detailed Syllabus:

  1. Binomial pricing models
  2. Conditional expectation, Martingales, Markov Processes
  3. Risk-neutral probability measure
  4. American derivatives
  5. Random Walks
  6. Interest rate models and derivatives
  7. Implementation of models in Excel/Matlab


  1. Steven E Shreve, Stochastic Calculus for Finance I: The Binomial Asset Pricing Model, Springer 2004.
  2. Les Clewlow and Chris Strickland, Implementing Derivatives Models, Wiley 1998.
  3. John C Hull, Options, Futures and Other Derivatives, 8th edition, Pearson, 2013.
  4. Rudiger Seydel, Tools for Computational Finance, 5th edition, Springer, 2012.

Past Instructors: Sunil Bowry

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