Course highlights:

• Systematic treatment of Brownian motion and Itô’s formula
• Discussion of the assumptions behind risk-neutral pricing
• Development of the connection between stochastic calculus and partial differential equations
• Exposition of foreign exchange models
• Derivation of the Heath-Jarrow-Morton no-arbitrage condition
• Presentation of the fundamental idea behind LIBOR market models
• Treatment of jump-diffusion models in option pricing and hedging