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Due to the
ongoing COVID pandemic, this course will be held
online. This is a new experience for
many students and instructors, so bear with us
as we endeavor to make things work as smoothly
as possible. Constructive criticisms and
suggestions are encouraged. Don't be afraid to
speak up if you have any problems or ideas!
Notes
On This Page
Introduction to capital markets and modern portfolio theory, including the organization and operation of securities markets, the Efficient Market Hypothesis and its implications, the Capital Asset Pricing Model, the Arbitrage Pricing Theory and more general factor models. Common stocks and their valuation, statistical analysis, and portfolio selection in a single-period, mean-variance context will be explored along with its solution as a quadratic program. Fixed income securities and their valuation, statistical analysis, and portfolio selection. Discussion of the development and use of financial derivatives. Whenever practical, examples will use real market data. Numerical exercises and projects in a high-level programming environment will also be assigned. Prerequisites: AMS 505 or AMS 510, and AMS 507. 3 credits.
Required
texts and software:
The following may provide
useful background. They are not
required texts:
Financial resources must be managed in the face of uncertainties in both investment performance and funding requirements. The risk and reward of available opportunities must be modeled and estimated. These insights must then be translated into a set of specific investment decisions. All of this must be done in the context of the objectives and constraints imposed by both the organization and the larger legal and economic environment it finds itself in.
We will cover the basics of financial instruments and markets, the pricing and evaluation of financial instruments and opportunities, and address the issues involved in allocating financial resources. To bring the student up to speed in Mathematica, a tutorial lesson will be given and the course's Notes and Solutions documents will add additional tutorial material as appropriate. The class lectures (which can be found via the Notes link for each class in the syllabus below) will develop the mathematical foundations required for successful completion of the course. We may introduce and develop additional concepts and applications not covered in the notes during the class. Homework assignments(Assignment links) and workshops (Workshop links) will also further expand the material in the class lectures. The homework solutions (Solution links) will be activated the day after the due of date of the relevant assignment.
Lecture Transcripts and Recordings
This is an
online class. There will no classes held "in person". As
a further learning resource for students, the links to
video recordings and transcripts generated by Zoom will
be made available to students. Generally, these will be
provided "as is" with little editing.
Attendance Policy
To remain in compliance with Federal Regulations, Stony Brook University must determine if a student maintained eligibility for Title IV Financial Aid. Financial Aid eligibility is determined based on a student’s attendance or participationin an academically related activity in the class. Participation in an academically related activity includes submitting assignments, taking examinations, study groups, online instruction, and related activities. Additional information can be found here.
Additional Lectures
We may hold additional lectures during the semester to review important mathematical topics that are prerequisites for the class and to assist students with developing their Mathematica skills. Attendance at these lectures is completely voluntary. No required course material will be covered that is not already covered by the text, lectures, or various assignments.
Homework assignments and workshops will be used to further develop the material covered during class, including many important practical applications, and will therefore introduce important new content. Homework assignments are due on or before the first class of the week after assignment. In addition to the weekly assignments, students will be assigned two workshop assignments that they will have two to three weeks to complete. All assignments must be submitted electronically. Homework assignments are submitted to the course TA, who will let you know via Blackboard how he or she wants those assignment submitted. Workshops, however, are submitted to the course instructor via email. For all work submitted the subject line must begin with AMS-511, followed by your student ID number, and concluding with a brief description of the submission;, e.g.,
AMS-511 123456789 Assignment 03
or
AMS-511 123456789 Workshop 02
Also, on the files you attach to your email please ensure that the filename includes your student ID and for any Mathematica notebooks submitted that your name, student ID, and assignment description also appears prominently in the notebook.
Examinations
There will be a final examination. Proctoring arrangements for how that examination will be handled are still under development. For the examination students will be able to bring in an 8.5" x 11" sheet of paper with whatever content he or she desires for use during the test; however, this sheet must be generated by the student him- or herself. Students may use calculators during the examinations.
Homework
assignments and workshops will be graded Pass-Fail. The
homework assignments seek to provide students with
practice and help to identify any weak points to ensure
they can develop the skills necessary for successful
completion of the course. Thus, if a reasonable attempt
is made to solve a problem, you will receive full
credit. Homework assignments submitted late receive no
credit.
The contribution of each to the final grade is as follows:
Positive trends in a student's performance will, however, receive due consideration. The course will be graded A, A-, B+, B, B-, C, F.
Throughout our
time together the sooner you inform me of any problem,
personal or academic, which may affect your attendance
or performance, the better the chance we have of solving
it together. Please do not delay in talking to me. I am
here to help. I want all of you to succeed.
Academic Honesty
Students with Disabilities Students who require assistance during emergency evacuation are encouraged to discuss their needs with their professors and the Student Accessibility Support Center. For procedures and information go to the following website: https://ehs.stonybrook.edu//programs/fire-safety/emergency-evacuation/evacuation-guide-disabilities and search Fire Safety and Evacuation and Disabilities. Office of Diversity and
Affirmative Action Stony Brook University is committed to a learning and working environment in which all members of our community can thrive. Maintaining an environment that is free from discrimination and sexual violence is a major part of that commitment.
To that end, the University is providing education and awareness training for all members of our community to help continue to foster the positive environment that is key to your success here at Stony Brook. More information about your rights and responsibilities can found at the Office of Diversity and Affirmative Action website.
Class Schedule & Assignments
Mathematica Stylesheet Required
To properly use the notebooks below you will need to download a copy of my StonyBrook.nb stylesheet and install it on your system. Type in "install stylesheet" in the search box of Mathematica's Documentation Center (accessed under Help on the main menu) for detailed instructions on how to install a stylesheet on your system. Please see me if you have any problems, and I will help you with the installation. This page is regularly updated throughout the semester. Remember to reload this page so that you have the most current version. |
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Lecture
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Documents
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Content
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01
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Notes Mathematica Tutorial Assignment Solution |
Introduction to Markets Time Value of Money Basic Wolfram
Language Tutporial (Mathematica) |
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02 |
Topics in Time Value of Money Bonds, Mortgages, and Other Forms of Debt Additional Features and Financial Tools in the Wolfram Language |
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03 |
Portfolio Optimization FinancialData[ ] Function |
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04 |
Notes Assignment Solution QuadraticProgramming.m |
Capital Asset Pricing Model Multi-Factor Models Risk Measures |
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05 |
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Introduction to Derivatives Binomial Lattice Models of Asset Dynamics Introduction to Stochastic Calculus and Itô's Lemma |
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06
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Additional
Topics in Options Theory |
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07 |
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Options
Strategies for Risk Management |
| 08 |
Credit Risk Structural Models Intensity Models Rating Agencies Credit Derivatives |
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Workshop
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09
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Power Laws Cash Flows in Graphs Optimal Growth and Portfolio Dynamics Kelly Betting |
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10
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AI/ML Models in Mathematica |
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| 11 | Natural Language Processing |
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Final
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