Request for New Course
E ASTERN M ICHIGAN U NIVERSITY
D IVISION OF A CADEMIC A FFAIRS
D
EPARTMENT
/S
CHOOL
: __________M
ATHEMATICS
___________________ C
OLLEGE
: CAS
C
ONTACT
P
ERSONS
: _____X
IAOXU
H
AN
, C
HRIS
G
ARDINER
_________________ ________________________________________________
C
ONTACT
P
HONE
: 487-1444 C
ONTACT
E
MAIL
: xhan1@emich.edu, cgardiner@emich.edu
R EQUESTED S TART D ATE : T ERM __F ALL ___________Y EAR ___2012________
This course is one of four courses we are proposing which will eventually be part of an MA concentration in computational finance. As a new interdisciplinary field, computational finance is an exciting field for students in mathematics, statistics and computer science to explore. This course focuses on the foundations of computational finance and on the application of numerical partial differential equation (PDE) methods to computational finance. It will be a good course for graduate students in applied math, applied statistics, and computational science to take.
1. Subject Code and Course Number: MATH 538
2 . Course Title: Introduction to Computational Finance
3. Credit Hours: 3
4. Repeatable for Credit? Yes_______ No___X___
5. Catalog Description (Limit to approximately 50 words.):
If “Yes”, how many total credits may be earned?_______
This course provides hand-on exploration of the mathematical principles behind futures, option and stock pricing; portfolio optimization; and other related topics in computational finance. Knowledge of numerical analysis and computer programming is assumed.
6. Method of Delivery (Check all that apply.) a. Standard (lecture/lab) X
On Campus b. Fully Online
X c. Hybrid/ Web Enhanced
7. Grading Mode: Normal (A-E) X
Off Campus
Credit/No Credit
8. Prerequisites: Courses that MUST be completed before a student can take this course. (List by Subject Code, Number and Title.)
9. Concurrent Prerequisites: Courses listed in #5 that MAY also be taken at the same time as a student is taking this course. (List by Subject
Code, Number and Title.)
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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.)
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)
12. Course Restrictions: a. Restriction by College. Is admission to a specific College Required?
College of Business
College of Education
Yes
Yes
No
No
X
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_______
Freshperson
All graduate students___X_
Certificate
Sophomore
Junior
Senior X
Second Bachelor________
Masters
Specialist
Doctoral
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
X d. Restriction by Permission. Will Departmental Permission be required? Yes
(Note: Department permission requires the department to enter authorization for every student registering.)
No
13. Will the course be offered as part of the General Education Program? Yes No X
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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
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 Restricted Elective
Program Required Restricted Elective
15. Will this course replace an existing course?
Yes No 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. W hen is the last time it will be offered?
b. Is the course to be deleted required by programs in other departments?
Contact the Course and Program Development Office if necessary. c. If “Yes”, do the affected departments support this change?
Term
Yes
Yes
Year
No
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.
20. Attach a detailed Sample Course Syllabus including: a.
Course goals, objectives and/or student learning outcomes
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Outline of the content to be covered c.
Student assignments including presentations, research papers, exams, etc. d.
Method of evaluation e.
Grading scale (if a graduate course, include graduate grading scale) f.
Special requirements g.
Bibliography, supplemental reading list h.
Other pertinent information.
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.
(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 $_________ $_________ $_________
1. Department/School
Vote of faculty: For ____18______ Against ____0______ Abstentions
(Enter the number of votes cast in each category.)
_____0_____
Department Head/School Director Signature Date
2. College/Graduate School
A. College
College Dean Signature
B. Graduate School (if Graduate Course)
Graduate Dean Signature
Date
Date
Associate Vice-President for Academic Programming Signature Date
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Prerequisites
Knowledge of numerical analysis and computer programming is assumed.
Course objectives
• introduce the fundamentals in computational finance
• study a number of applications of numerical PDE’s to computational finance
Sample Assessment Scheme
Students are expected to finish two team projects and three independent projects and solve weekly-based homework and quizzes. Each team is required to present their final project in the class. There will be a midterm and final exam.
Homework: 10%
Project: 40%
Quizzes: 10%
Midterm: 20%
Final: 20%
Projects
There are totally five projects in this class. A well-written project report should be submitted for each project. All the related source codes and running results for the project are also required to send to me by email. For each team project, team leaders are required to report each team member’s contributions to the project. Feel free to use any programming languages you feel comfortable to simulate your ideas and finish your projects.
Grading Scale
A: [90,100], A- : [87, 90), B+: [82, 87), B: [79, 82), B-: [77, 79), C+: [75, 77)
C: [72, 75), C-: [70, 72), E: [0, 70)
Topics to be covered
1. Introduction to Financial Engineering
1.
Financial market basics
2. Instruments and positions
3. Syndication process
4. Forward Contracts
5. Currency Forwards
6. Forward Loans
7. Swaps
8. Options
2. Options Engineering
1. Option strategies
2. Volatility-based strategies
3. Exotics
4. Quoting Conventions
5. Arbitrage-free dynamics
6. Monte Carlo approaches
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7. Calibration
3. Fixed-Income Pricing
1. Framework of Swaps
2. Term structure of modeling
3. CMS swaps
4. Volatility swaps
5. Volatility smile
6. Exotic options and the smile
4. Credit Derivatives and Equity instrument
1. Credit default swaps
2. Total return swaps
3. Balance sheets and credit derivatives
4. Application of derivatives
5. Equity products
6. Financial Engineering of Securitization
7. Pricing Swaptions
5. Numerical PDE methods in financial engineering
1. Finite difference methods in Financial Engineering
2. Finite element methods in Financial Engineering
Bibliography
Principles of Financial Engineering , Salih Neftci, Academic Press (2004)
A Primer For The Mathematics Of Financial Engineering , Second Edition by Dan Stefanica, FE Press LLC, 2011.
Frequently Asked Questions in Quantitative Finance, 2 nd edition, by Paul Wilmott, Wiley 2009.
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