Notes on Financial Engineering

Professor K. Sigman

Lecture Notes

  1. Interest rates and present value
  2. Internal rate of return, bonds, yield
  3. Portfolio mean and variance, the Markowitz problem
  4. One-fund and Two-fund theorems
  5. Binomial Lattice Model for stocks and option pricing
  6. Capital Asset Pricing Model
  7. Factor models
  8. Gambler's ruin problem
  9. Introduction to Brownian motion
  10. Geometric Brownian motion, modeling stock prices in continuous time, Black-Scholes option pricing formula
  11. Introduction to Ito integration, Ito's rule, derivation of Black-Scholes PDE
Professor Karl Sigman
Department of Industrial Engineering and Operations Research

Phone: (212) 854-3556
FAX: (212) 854-8103