Financial Mathematics. In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk.

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Presentation transcript:

Financial Mathematics

In finance, a hedge is an investment that is taken out specifically to reduce or cancel out the risk in another investment.financerisk

central limit theorem (CLT) states that the sum of a large number of independent and identically-distributed random variables will be approximately normally distributed (i.e., following a Gaussian distribution, or bell-shaped curve) if the random variables have a finite variance. independent and identically-distributed random variables normally distributedi.e.finite

Call Option Put Option Lets look at some equity option markets D

Black Scholes Pricing Option Formula

Statistical Arbitrage

Pairs Trading Ford and GM

Co-Integration Excel: Simple_Cointegration_Example.xls

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