IE 375 | Course Introduction and Application Information

Course Name
Financial Engineering
Code
Semester
Theory
(hour/week)
Application/Lab
(hour/week)
Local Credits
ECTS
IE 375
Fall/Spring
3
0
3
5

Prerequisites
None
Course Language
English
Course Type
Elective
Course Level
First Cycle
Course Coordinator -
Course Lecturer(s)
Assistant(s) -
Course Objectives To familiarize students both with the concepts underlying the economic analysis of engineering projects, as well as with the type of mathematical derivations needed in the analysis.
Course Description The students who succeeded in this course;
  • Will be able to familiarize with the concepts underlying the economic analysis of engineering projects
  • Will be able to develop related mathematical derivations needed in the analysis
  • Will be able to evaluate investment opportunities
  • Will be able to determine optimal decisions by using mathematical optimization models
  • Will be able to solve sequential optimization problems by using simulation models
Course Content Students will learn to make decisions by taking into account such features as interest rates, and rates of return. They will learn about the concept of arbitrage, and when consideration of such is sufficient to price different investments. Applications to call and put options will be given. Students will learn when arbitrage arguments are not sufficient to evaluate investment opportunities. They will learn to make use of utility theory and mathematical optimization models to determine optimal decisions. Dynamic programming will be introduced and used to solve sequential optimization problems. The use of simulation in financial engineering will be explored.

 



Course Category

Core Courses
Major Area Courses
Supportive Courses
Media and Management Skills Courses
Transferable Skill Courses

 

WEEKLY SUBJECTS AND RELATED PREPARATION STUDIES

Week Subjects Related Preparation
1 Introduction, Interest Rates and Present Value An Elementary Introduction to Mathematical Finance: Options and Other Topics, Second ed., Sheldon Ross, Cambridge University Press, 2003 Ch1
2 Rate of Returns An Elementary Introduction to Mathematical Finance: Options and Other Topics, Second ed., Sheldon Ross, Cambridge University Press, 2003 Ch2
3 Arbitrage and its use in Pricing An Elementary Introduction to Mathematical Finance: Options and Other Topics, Second ed., Sheldon Ross, Cambridge University Press, 2003 Ch3
4 The Arbitrage Theorem An Elementary Introduction to Mathematical Finance: Options and Other Topics, Second ed., Sheldon Ross, Cambridge University Press, 2003 Ch3
5 Applications of the Arbitrage Theorem An Elementary Introduction to Mathematical Finance: Options and Other Topics, Second ed., Sheldon Ross, Cambridge University Press, 2003 Ch3
6 Review and Midterm Exam
7 Geometric Brownian Motion An Elementary Introduction to Mathematical Finance: Options and Other Topics, Second ed., Sheldon Ross, Cambridge University Press, 2003 Ch4
8 Option Pricing Theory An Elementary Introduction to Mathematical Finance: Options and Other Topics, Second ed., Sheldon Ross, Cambridge University Press, 2003 Ch5
9 Optimization Models in Financial Engineering An Elementary Introduction to Mathematical Finance: Options and Other Topics, Second ed., Sheldon Ross, Cambridge University Press, 2003 Ch6
10 Solving Optimization Models by Dynamic Programming An Elementary Introduction to Mathematical Finance: Options and Other Topics, Second ed., Sheldon Ross, Cambridge University Press, 2003 Ch6
11 Dynamic Programming models An Elementary Introduction to Mathematical Finance: Options and Other Topics, Second ed., Sheldon Ross, Cambridge University Press, 2003 Ch6
12 Pricing by Expected Utility An Elementary Introduction to Mathematical Finance: Options and Other Topics, Second ed., Sheldon Ross, Cambridge University Press, 2003 Ch7
13 Simulation and Variance Reduction An Elementary Introduction to Mathematical Finance: Options and Other Topics, Second ed., Sheldon Ross, Cambridge University Press, 2003 Ch8
14 Simulation Analysis of Exotic Options and Final Review An Elementary Introduction to Mathematical Finance: Options and Other Topics, Second ed., Sheldon Ross, Cambridge University Press, 2003 Ch8
15 General review and evaluation
16 Review of the Semester  

 

Course Notes/Textbooks Textbook: An Elementary Introduction to Mathematical Finance: Options and Other Topics, Second ed., Sheldon Ross, Cambridge University Press, 2003
Suggested Readings/Materials

 

EVALUATION SYSTEM

Semester Activities Number Weigthing
Participation
1
10
Laboratory / Application
Field Work
Quizzes / Studio Critiques
Homework / Assignments
10
10
Presentation / Jury
1
10
Project
Seminar / Workshop
Portfolios
Midterms / Oral Exams
1
30
Final / Oral Exam
1
40
Total

Weighting of Semester Activities on the Final Grade
28
60
Weighting of End-of-Semester Activities on the Final Grade
1
40
Total

ECTS / WORKLOAD TABLE

Semester Activities Number Duration (Hours) Workload
Course Hours
Including exam week: 16 x total hours
16
3
48
Laboratory / Application Hours
Including exam week: 16 x total hours
16
Study Hours Out of Class
15
2
Field Work
Quizzes / Studio Critiques
Homework / Assignments
10
1
Presentation / Jury
1
Project
3
Seminar / Workshop
Portfolios
Midterms / Oral Exams
1
10
Final / Oral Exam
1
20
    Total
118

 

COURSE LEARNING OUTCOMES AND PROGRAM QUALIFICATIONS RELATIONSHIP

#
Program Competencies/Outcomes
* Contribution Level
1
2
3
4
5
1 Adequate knowledge in Mathematics, Science and Software Engineering; ability to use theoretical and applied information in these areas to model and solve Software Engineering problems
2 Ability to identify, define, formulate, and solve complex Software Engineering problems; ability to select and apply proper analysis and modeling methods for this purpose
3 Ability to design, implement, verify, validate, measure and maintain a complex software system, process or product under realistic constraints and conditions, in such a way as to meet the desired result; ability to apply modern methods for this purpose
4 Ability to devise, select, and use modern techniques and tools needed for Software Engineering practice
5 Ability to design and conduct experiments, gather data, analyze and interpret results for investigating Software Engineering problems
6 Ability to work efficiently in Software Engineering disciplinary and multi-disciplinary teams; ability to work individually
7 Ability to communicate effectively in Turkish, both orally and in writing; knowledge of a minimum of two foreign languages
8 Recognition of the need for lifelong learning; ability to access information, to follow developments in science and technology, and to continue to educate him/herself
9 Awareness of professional and ethical responsibility
10 Information about business life practices such as project management, risk management, and change management; awareness of entrepreneurship, innovation, and sustainable development
11 Knowledge about contemporary issues and the global and societal effects of engineering practices on health, environment, and safety; awareness of the legal consequences of Software Engineering solutions

*1 Lowest, 2 Low, 3 Average, 4 High, 5 Highest