ST213 Half Unit
Introduction to Pricing, Hedging and Optimization
This information is for the 2025/26 session.
Course Convenor
David Itkin
Availability
This course is compulsory on the BSc in Financial Mathematics and Statistics. This course is available on the Erasmus Reciprocal Programme of Study and Exchange Programme for Students from University of California, Berkeley. This course is freely available as an outside option to students on other programmes where regulations permit. It does not require permission. This course is available with permission to General Course students.
Requisites
Co-requisites:
Students must complete MA203 and ST202 either before taking this course or in the same year as this course.
Course content
This course introduces the concepts of valuation, hedging and portfolio selection in a discrete-time environment. Towards the end, it introduces continuous-time markets in a heuristic fashion. It covers the following topics:
• The binomial model; pricing and replication.
• Trinomial model and incompleteness, arbitrage-free price intervals.
• General discrete-time models and the fundamental theorems.
• Portfolio optimization and hedging.
• Multi-period models and backwards induction methods.
• Passage to continuous time Black & Scholes model.
Teaching
10 hours of seminars and 20 hours of lectures in the Winter Term.
This course has a reading week in Week 6 of Winter Term.
Formative assessment
Students will be expected to produce 9 problem sets in the WT.
Certain problem sets will be returned with feedback.
Indicative reading
Lecture notes will be provided.
Assessment
Exam (80%), duration: 120 Minutes, reading time: 15 minutes in the Spring exam period
Problem sets (20%)
Key facts
Department: Statistics
Course Study Period: Winter Term
Unit value: Half unit
FHEQ Level: Level 5
CEFR Level: Null
Total students 2024/25: 49
Average class size 2024/25: 25
Capped 2024/25: NoCourse selection videos
Some departments have produced short videos to introduce their courses. Please refer to the course selection videos index page for further information.
Personal development skills
- Self-management
- Problem solving
- Communication
- Application of numeracy skills
- Specialist skills