Request for New Course
EASTERN MICHIGAN UNIVERSITY
DIVISION OF ACADEMIC AFFAIRS
REQUEST FOR NEW COURSE
DEPARTMENT/SCHOOL: __MATHEMATICS________________COLLEGE:
ARTS AND SCIENCES
CONTACT PERSON: DR. OVIDIU CALIN___________________________________________________________
CONTACT PHONE: 7-1292
CONTACT EMAIL:
OCALIN@EMICH.EDU
REQUESTED START DATE: TERM__WINTER_________YEAR__2014_
A. Rationale/Justification for the Course
This is a course on computer implementations of financial applications. This fits well into a group of four other
graduate courses taught in the Math department (Math 530, Math 534, Math 538, and Math 539), which might be used
in the near future as a new graduate concentration in mathematical finance.
The course uses basic notions of programming to create financial classes and methods represented by visual
libraries, with an emphasis on pricing derivatives and value at risk for financial portfolios software. This course will be
useful for students who wish to work in the banking industry as programmers as well as actuarial software developers.
B. Course Information
Math 540
1. Subject Code and Course Number:
2. Course Title:
Modeling Financial Derivatives
3. Credit Hours:
3
4. Repeatable for Credit? Yes_______
No__X____
If “Yes”, how many total credits may be earned?_______
5. Catalog Description (Limit to approximately 50 words.):
An introduction to numerical implementations of financial derivatives, their pricing methods, financial and actuarial
models, and portfolio value at risk. Knowledge of object oriented programming as well as an introduction to derivative
securities is assumed.
6. Method of Delivery (Check all that apply.)
a. Standard (lecture/lab)
On Campus
lecture
X
Off Campus
b. Fully Online
c. Hybrid/ Web Enhanced
7. Grading Mode:
Normal (A-E)
X
Credit/No Credit
8. Prerequisites: Courses that MUST be completed before a student can take this course. (List by Subject Code, Number and Title.)
None
9. Concurrent Prerequisites:
Code, Number and Title.)
None
Courses listed in #5 that MAY also be taken at the same time as a student is taking this course. (List by Subject
New Course Form
10. Corequisites: Courses that MUST be taken at the same time as a student in taking this course.
(List by Subject Code, Number and
Title.)
None
11. Equivalent Courses. A student may not earn credit for both a course and its equivalent. A course will count as a repeat if an equivalent
course has already been taken. (List by Subject Code, Number and Title)
None
12. Course Restrictions:
a. Restriction by College. Is admission to a specific College Required?
College of Business
Yes
No
X
College of Education
Yes
No
X
b. Restriction by Major/Program. Will only students in certain majors/programs be allowed to take this course?
Yes
No
X
If “Yes”, list the majors/programs
c. Restriction by Class Level Check all those who will be allowed to take the course:
Undergraduate
Graduate
All undergraduates_______
All graduate students__X__
Freshperson
Certificate
X
Sophomore
Masters
X
Junior
Specialist
Senior
Doctoral
Second Bachelor__ ______
UG Degree Pending__X___
Post-Bac. Tchr. Cert._____
Low GPA Admit_______
Note: If this is a 400-level course to be offered for graduate credit, attach Approval Form for 400-level Course for Graduate
Credit. Only “Approved for Graduate Credit” undergraduate courses may be included on graduate programs of study.
Note: Only 500-level graduate courses can be taken by undergraduate students. Undergraduate students may not register for
600-level courses
d. Restriction by Permission. Will Departmental Permission be required?
Yes
No
(Note: Department permission requires the department to enter authorization for every student registering.)
13. Will the course be offered as part of the General Education Program?
Yes
No
X
X
If “Yes”, attach Request for Inclusion of a Course in the General Education Program: Education for Participation in the Global Community
form. Note: All new courses proposed for inclusion in this program will be reviewed by the General Education Advisory Committee. If this
course is NOT approved for inclusion in the General Education program, will it still be offered? Yes
No
New Course Form
C. Relationship to Existing Courses
Within the Department:
14. Will this course will be a requirement or restricted elective in any existing program(s)? Yes
No
X
If “Yes”, list the programs and attach a copy of the programs that clearly shows the place the new course will have in the curriculum.
Program
Required
Program
Required
15. Will this course replace an existing course? Yes
No
Restricted Elective
Restricted Elective__
X
16. (Complete only if the answer to #15 is “Yes.”)
a. Subject Code, Number and Title of course to be replaced:
b. Will the course to be replaced be deleted?
Yes
No
17. (Complete only if the answer #16b is “Yes.”) If the replaced course is to be deleted, it is not necessary to submit a Request for
Graduate and Undergraduate Course Deletion.
a. When is the last time it will be offered?
Term
Year
b. Is the course to be deleted required by programs in other departments?
Contact the Course and Program Development Office if necessary.
Yes
No
c. If “Yes”, do the affected departments support this change?
Yes
No
If “Yes”, attach letters of support. If “No”, attach letters from the affected department explaining the lack of support, if available.
Outside the Department: The following information must be provided. Contact the Course and Program Development office for
assistance if necessary.
18. Are there similar courses offered in other University Departments?
If “Yes”, list courses by Subject Code, Number and Title
Yes
No
X
19. If similar courses exist, do the departments in which they are offered support the proposed course?
Yes
No
If “Yes”, attach letters of support from the affected departments. If “No”, attach letters from the affected department explaining the lack of
support, if available.
D. Course Requirements
20. Attach a detailed Sample Course Syllabus including:
a.
b.
c.
d.
e.
f.
g.
h.
Course goals, objectives and/or student learning outcomes
Outline of the content to be covered
Student assignments including presentations, research papers, exams, etc.
Method of evaluation
Grading scale (if a graduate course, include graduate grading scale)
Special requirements
Bibliography, supplemental reading list
Other pertinent information.
New Course Form
NOTE: COURSES BEING PROPOSED FOR INCLUSION IN THE EDUCATION FOR PARTICIPATION IN THE GLOBAL
COMMUNITY PROGRAM MUST USE THE SYLLABUS TEMPLATE PROVIDED BY THE GENERAL EDUCATION
ADVISORY COMMITTEE. THE TEMPLATE IS ATTACHED TO THE REQUEST FOR INCLUSION OF A COURSE IN THE
GENERAL EDUCATION PROGRAM: EDUCATION FOR PARTICIPATION IN THE GLOBAL COMMUNITY FORM.
E. Cost Analysis (Complete only if the course will require additional University resources.
Fill in Estimated Resources for the
sponsoring department(s). Attach separate estimates for other affected departments.)
Estimated Resources:
Year One
Year Two
Year Three
Faculty / Staff
$_________
$_________
$_________
SS&M
$_________
$_________
$_________
Equipment
$_________
$_________
$_________
Total
$_________
$_________
$_________
F. Action of the Department/School and College
1. Department/School
Vote of faculty: For ____18______
Against ____0______
Abstentions ____0______
(Enter the number of votes cast in each category.)
Department Head/School Director Signature
Date
2. College/Graduate School
A. College
College Dean Signature
Date
B. Graduate School (if Graduate Course)
Graduate Dean Signature
Date
G. Approval
Associate Vice-President for Academic Programming Signature
Date
New Course Form
Sample Course Syllabus
Eastern Michigan University
Math 535: Modeling Financial Derivatives
Fall 2013
Student Syllabus
Instructor: Dr. Ovidiu Calin
Office #: Pray-Harrold, room 516 F
email: ocalin@emich.edu
(a) Course introduction
Financial analysts use mathematical models to guide their decisions when trading derivative financial instruments.
These algorithms are in general complex and their true power is proved useful only after their computer
implementation. This course deals with the implementation of the most important financial models in an Object
Oriented Programming environment.
(b) Course goals, objectives and/or student learning outcomes
The main goal of this course is to present how the Object Oriented Programming be used to model financial
derivatives. Students will learn how to model financial securities by creating classes, writing methods and using visual
libraries in order to price and hedge derivatives and present the results in a self-containing software.
(c) Outline of the content to be covered
A. Brief Review of Object Oriented Programming
1.
2.
3.
4.
5.
Operators, Types, Variables
The if, else if and switch statements
Classes, Methods, properties
Class inheritance, Polymorphism, Encapsulation
User interfaces with WPF
B. Pricing Derivatives by Exact Formulas
1. Bonds (with constant, predictable and stochastic interest rate)
2. European Options (puts and calls)
3. Perpetual American Options (calls and puts)
4. Asian options on geometric average
5. European Barrier Options
6. Down-Out Call Options
7. Down-Out Put Options
8. Up-Out Call Options
9. Up-Out Put Options
10. Down-In Call Options
11. Down-In Put Options
12. Up-In Call Options
13. Up-In Put Options
14. Double Barrier European Option
15. Knock-Out Call Options
16. Knock-Out Put Options
17. Knock-In Call Options
18. Knock-In Put Options
New Course Form
19. Lookback European Options
20. Fixed Lookback Call Options
21. Fixed Lookback Put Options
22. Call On the Maximum
23. Put On the Minimum
C. Pricing Derivatives by Approximation Methods
1. Barone-Adesi-Whaley Approximation of the American Put
2. Asian Options on the Arithmetic Average
D. Pricing Derivatives by Monte Carlo Methods
1.
2.
3.
4.
Pseudo Random Generator
European Options
Bonds
Barrier options
E. Finite Difference Methods
1.
2.
3.
4.
5.
Standard European Options
Standard American Options
Exotic Options
Barrier Options
Asian Options
F. Tree Methods
1. Binomial trees for European Options
2. Binomial trees for American Options
3. Trees for Barrier Options
G. Other topics
4.
5.
6.
7.
Greek sensitivities
Implied volatility
Value at Risk
Dynamical Hedging
(d) Student assignments including presentations, research papers, exams
The lectures will be delivered in a computer lab, where students will work individually on software projects. There are
no exams or quizzes in this class. There are several small projects due during the semester and one large project each
student has to present in front of their peers at the end of the semester.
(e) Method of evaluation
Students will be evaluated according to their performance in individual projects. There is a small project due each class
and a final larger project due at the end of semester.
(f) Grading scale (if a graduate course, include graduate grading scale)
The projects during the semester worth 75% of the grade.
The final project worth 25% of the grade.
The cut-offs for the final grade in this course will be calculated as follows:
New Course Form
A
AB+
B
BC+
C
95 %
90 %
85 %
80 %
75 %
70 %
65 %
(g) Bibliography, supplemental reading list
[1] H.JOHNSON. Options on the maximum of the minimum of several assets. J. of Finance and Quantitative Analysis,
22:227–283, 1987.
[2] B.M.GOLDMAN H.B.SOSIN M.A.GATTO. Path dependent options: buy at low, sell at high. J. of Finance,
34:111–127, 1979.
[3] E.REINER M.RUBINSTEIN. Breaking down the barriers. Risk, 4:28–35, 191.
[4] F.BLACK M.SCHOLES. The pricing of Options and Corporate Liabilities. Journal of Political Economy, 81:635–
654, 1973.
[5] N.KUNIMOTO N.IKEDA. Pricing options with curved boundaries. Mathematical finance, 2:275–298, 1992.
[6 R.STULZ. Options on the minimum or the maximum of two risky assets. J. of Finance, 10:161–185, 1992.
[7] A.CONZE R.VISWANATHAN. Path dependent options: the case of lookback options. J. of Finance, 46:1893–
1907, 1992.
(h) Prerequisites
Students are expected to have a background in derivative pricing and stochastic calculus. Students are expected to have
taken an object oriented programming class. The prerequisites for this are either COSC 246 (Introduction to C++) or
COSC 514 (Java).
(e) Textbook: The following website will be very useful when implementing code:
https://www.rocq.inria.fr/mathfi/Premia/free-version/doc/premia-doc/pdf_html/premia14_doc/index.html
(j) Instructor Information
I am a full-time faculty member at Eastern Michigan University in the Department of Mathematics and your education
is my primary responsibility. I am happy to meet with you on any issue regarding class activity and to provide help
when you do not understand something we have covered. You may see me in my office before the class or after class if
time permits. Also, my email address is ocalin@emich.edu.
More information about my teaching and research interests can be found at my webpage at
http://people.emich.edu/ocalin/
(k) Classroom Etiquette
Please silence your cellular phones before class and, under no circumstances may you use a phone for any purposes
during class, including text messaging. If you need to make an emergency call, please do it after leaving the class
quietly.
New Course Form
(l) Disabilities
Any students needed to arrange a reasonable accommodation for a documented disability should contact Access
Service Office in 203 King Hall, 487-2470.
(m) Miscellaneous
In the event that you must miss an exam or a quiz due date for a VALID (emergency) AND verifiable (PRESENT
PROOF) I must be notified preferably in advance by a phone call or an email message.
Examples of unverifiable (or inadequate) reasons: oversleeping, going on a pleasure trip, or just not feeling like
coming to class.
Weather-related problems that I can verify through the news media are always valid. Do not risk your life to come to
class! If school is in session I will most likely be here, because I don't live far away. If you commute and do not feel it
is safe to travel, do not come. Give me a call and you will not be penalized for missing the class.
Class attendance is essential. If you must miss a class, it is your responsibility to get any handouts from the professor,
notes from a classmate, and complete the assignments. Also, the professor is available during the office hours. Tutorial
assistance is available free of charge in the Math Student Help Center (220 Pray-Harrold). Assistance is also available
through The Learning center on campus (Bruce T. Halle Library).
If you cannot attend the official office hours, I also offer office hours by appointment.
Every student will be assigned a number in the first day of class, called lucky number. Please write this number together
with your name on all homework assignments and tests for the rest of the semester.
When you prepare your homework please write eligibly. The grade is given not only for correctness but also for the
presentation and style.
During exams students often do mistakes and they need to erase some parts of the solution. It is suggested to write the
exam in a black pencil and have an eraser on hand.