ENMG 624 Financial Engineering I – Summer 2024
Instructor: Bacel Maddah
Syllabus
Class Notes
Review on the Theory of Interest
Topic 2
Mean-Variance Portfolio Theory (1) (Chapter 6, text)
Mean-Variance Portfolio Theory (2) (Chapter 6, text)
Two-Asset Portfolio Diagram | Two-Fund Theorem Application (Ex 6.10)
Topic 3
The Capital Asset Pricing Model (Chapter 7, text)
Other Pricing Models (Chapter 8, text)
Data and Statistics (Chapter 9, text)
CAPM In-Class Examples | Example 9.1: Simulating stock data | Example 9.6: Estimating mean stock return
Topic 4
General Principles (Portfolio structuring via maximizing utility) (Chapter 11, text)
Forwards, Futures, and Swaps (Chapter 12, text)
Models of Asset Dynamics (Chapter 13, text)
Examples on log-optimal portfolios and log-optimal pricing
Futures prices snapshot from the WSJ
Excel Simulation: Geometric Brownian Motion
Topic 5
Basic Option Theory (Chapter 14, text, 1)
Basic Option Theory (Chapter 14, text, 2)
Option prices snapshot from the Nasdaq
Excel models for pricing a European call, a European put, an American put, and a real option
Homework Assignments
HW 1 Probability refresh. Due Thu, Jun 20.
HW 2 6.3, 6.5, 6.6, 6.7, 6.11 (Text). Due Thu, Jul 4.
HW 3 7.1, 7.3, 7.6, 7.10 (Text). Due Thu, Jul 11.
HW 4 8.1, 8.2, 9.2, 9.3, 11.1, 11.11, 11.16 (Text). Due Tue, Jul 23.
HW 5 13.1, 13.6, Supplement to 13.6 – evaluate P{S(1)>S(0)}, 14.1, 14.2, 14.4 (a) & (b), 14.8, 14.10, 14.13, 14.15. Due Sun, Aug 4, by email to probhw@gmail.com. (Send one clear pdf file.)
Links
Bloomberg | Yahoo Finance | WSJ | Morningstar