Mathematical Finance, FIN 539, Section 3

Philip H. Dybvig
Washington University in Saint Louis


Final Exam answers

Coming to the end of the class!

Wednesday class one-shot approach (continued) and the Fundamental Theorem of Asset Pricing (FTAP) (Wednesday, April 28, 2:30-3:50PM CDT)

TA session The final TA session, discussing Homework 6 (Sunday, May 2, 7:00-8:00PM CDT)

Monday class Xtreme review (Monday, May 3, 2:30-3:50PM CDT)

Oral Final Exam The final exam will have two parts: a written exam (in Zoom) and a short oral exam (one-on-one, also in Zoom). Having an oral exam should give a little extra incentive to study. Also, it will be an opportunity for a little of the interaction we missed online. Scheduling to be announced...

Written Final (in Zoom) The written final exam will be held on Wednesday, May 12, 1:00-4:00pm CDT. I switched from a 2-hour exam to a 3-hour exam but I will not make the exam any longer than in the first mini. I just don't want the exam to be a race against time.

The final will cover what is in the homeworks and the lectures. Here is a practice exam to give you a better idea:

Practice Final Exam answers

I also prepared this summary of what to expect and what not to expect:


Important: Exam Rules This is a closed-book exam with absolutely no electronics allowed outside the Zoom interface, which must have camera on, and for submitting the exam. For the exam, you are not permitted to have access to notes or any electronics, including cell phones, computers, mp3 players, iPads etc. All of these devices are computers that can be used to store information that can give an unfair advantage and most allow communications which also could be used for cheating. I want to make sure there is not even an appearance of cheating. Please take care to follow these rules. I don't like reporting infractions, but it is my duty and you will not be happy if I have to report you.

Welcome to Mathematical Finance! We will cover some interesting mathematical tools that are very useful in practice, with a focus on applications to investments.

This section is available in-person and on-line. Class meetings will be held in Zoom. Information on the Zoom meetings can be found in the course's Canvas page. The classes will also be recorded, with recordings available on Zoom. Some more information is available in Lecture 0 below and in the syllabus.

Homeworks Here are homeworks you can work to help to learn the material. Although they will not be graded, I urge you to work the homeworks before the TA session when they will be discussed.

Homework 1 answers to be discussed by the TAs on Sunday, March 28, at 7:00PM CDT (Sunday, March 29 at 8:00AM Beijing Time Zone)

Homework 2 answers to be discussed by the TAs on Sunday, April 4, at 7:00PM CDT (Sunday, April 5 at 8:00AM Beijing Time Zone)

Homework 3 answers to be discussed by the TAs on Sunday, April 11, at 7:00PM CDT (Sunday, April 12 at 8:00AM Beijing Time Zone)

Homework 4 answers to be discussed by the TAs on Sunday, April 18, at 7:00PM CDT (Sunday, April 19 at 8:00AM Beijing Time Zone)

Homework 5 answers to be discussed by the TAs on Sunday, April 25, at 7:00PM CDT (Sunday, April 26 at 8:00AM Beijing Time Zone)

Homework 6 answers to be discussed by the TAs on Sunday, May 2, at 7:00PM CDT (Sunday, May 2 at 8:00AM Beijing Time Zone)

Slides Most of the lectures will use a virtual whiteboard. This is a good format for technical material, and this is also what my TAs suggested. However, I have also developed a set of slides for your use as supplemental material.

Lecture 0: Course overview

Lecture 1: Decision theory and static choice problems

Lecture 2: Dynamic programming

Lecture 3: Multiple assets, hedging state variables, and pricing models

Lecture 4: FTAP, valuation, and the one-shot approach

I suggest the following book chapter for background readings on single-period models:

Download Dybvig, Philip H. and Stephen A. Ross (2003), Arbitrage, State Prices, and Portfolio Theory, in George Constantinides and René Stulz, ed., Handbook of the Economics of Finance, volume 1b, North-Holland.

There is no textbook for the class, and the class is designed to be self-contained. If you want a textbook for an alternative exposition and coverage of more topics, I recommend the following book:

Back, Kerry, 2017, Asset Pricing and Portfolio Choice Theory, second edition, Oxford University Press.

Kerry is a serious scholar and my co-author. He was formerly at Washington University, but he has moved to Rice University.