Learning objectives
At the end of the course, the student will be able to set up a simple problem of probability calculus and to evaluate the utility function of an agent. Moreover, the student will understand how the derivatives markets work, and will be proficient in the <em>delta-hedging</em> technique based on the binomial market model by Cox, Ross and Rubinstein.
Prerequisites
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Course unit content
In the first part of the course, the main mathematical instruments involved in decisions are covered, with particular interest towards Probability. In the second part, the main financial instruments (options, futures and other derivative securities) are exposed, which are available in financial markets for firms working in an international setting and willing to hedge their risks. In the third and last part, the basic concepts in Decision Theory are given, with the exposition of von Neumann and Morgenstern Theorem and its main extensions.
Full programme
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Bibliography
E. Castagnoli, <em>Prices in a Financial Market</em>, selected parts available in the teacher's website.<br />
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E. Castagnoli, M. Cigola, L. Peccati, <em>Probability. A Brief Introduction</em> (second edition), EGEA 2009<br />
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G. Favero, <em>Contare oltre le dita. Elementi di calcolo combinatorio</em>, available in the teacher's website<br />
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J.C. Hull, <em>Fondamenti dei mercati di futures e opzioni</em> (sixth edition), Prentice-Hall 2009
Teaching methods
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Assessment methods and criteria
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Other information
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