IE 375 | Course Introduction and Application Information - Department of Software Engineering

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
Mode of Delivery	-
Teaching Methods and Techniques of the Course	Lecture / Presentation
National Occupation Classification	-
Course Coordinator	Dr. Öğr. Üyesi Caner Taçoğlu
Course Lecturer(s)	Dr. Öğr. Üyesi Caner Taçoğlu
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.

Learning Outcomes

#	Content	PC Sub	* Contribution Level
#	Content	PC Sub	1	2	3	4	5
1	Will be able to familiarize with the concepts underlying the economic analysis of engineering projects
2	Will be able to develop related mathematical derivations needed in the analysis
3	Will be able to evaluate investment opportunities
4	Will be able to determine optimal decisions by using mathematical optimization models
5	Will be able to solve sequential optimization problems by using simulation models

Course Description

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

Week	Subjects	Related Preparation	Learning Outcome
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

Semester Activities	Number	Weighting	LO 1	LO 2	LO 3	LO 4	LO 5
Participation	1	10
Laboratory / Application
Field Work
Quizzes / Studio Critiques
Portfolio
Homework / Assignments	10	10
Presentation / Jury	1	10
Project
Seminar / Workshop
Oral Exams
Midterm	1	30
Final 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

Semester Activities	Number	Duration (Hours)	Workload
Theoretical Course Hours (Including exam week: 16 x total hours)	16	3	48
Laboratory / Application Hours (Including exam week: '.16.' x total hours)	16		0
Study Hours Out of Class	14	2	28
Field Work			0
Quizzes / Studio Critiques			0
Portfolio			0
Homework / Assignments	10	2	20
Presentation / Jury	1	15	15
Project			0
Seminar / Workshop			0
Oral Exam			0
Midterms	1	17	17
Final Exam	1	22	22
		Total	150

#	PC Sub	Program Competencies/Outcomes	* Contribution Level
#	PC Sub	Program Competencies/Outcomes	1	2	3	4	5
1	Engineering Knowledge: Knowledge of mathematics, science, basic engineering, computer computation, and topics specific to related engineering disciplines; the ability to use this knowledge in solving complex engineering problems		-	-	-	-	-
	1	Mathematics	-	-	-	-	-
	2	Science	-	-	-	-	-
	3	Basic engineering	-	-	-	-	-
	4	Computer computation	-	-	-	-	-
	5	Topics specific to related engineering disciplines	-	-	-	-	-
	6	The ability to use this knowledge in solving complex engineering problems	-	-	-	-	-
2	Problem Analysis: The ability to define, formulate, and analyze complex engineering problems by using fundamental science, mathematics, and engineering knowledge, while considering the relevant UN Sustainable Development Goals (SDGs) related to the problem.		-	-	-	-	-
3	Engineering Design: The ability to design creative solutions to complex engineering problems; the ability to design complex systems, processes, devices, or products that meet present and future requirements, considering realistic constraints and conditions.		-	-	-	-	-
	1	The ability to design creative solutions to complex engineering problems	-	-	-	-	-
	2	Considering realistic constraints and conditions in designing complex systems, processes, devices, or products	-	-	-	-	-
	3	The ability to design in a way that meets current and future requirements	-	-	-	-	-
4	Use of Techniques and Tools: The ability to select and use appropriate techniques, resources, and modern engineering and information technology tools, including prediction and modeling, for the analysis and solution of complex engineering problems, while being aware of their limitations		-	-	-	-	-
5	Research and Investigation: The ability to use research methods, including literature review, designing experiments, conducting experiments, collecting data, analyzing and interpreting results, for the investigation of complex engineering problems.		-	-	-	-	-
	1	The ability to use research methods, including literature review	-	-	-	-	-
	2	Designing experiments	-	-	-	-	-
	3	Conducting experiments, collecting data, analyzing and interpreting results, for the investigation of complex engineering problems	-	-	-	-	-
6	Global Impact of Engineering Practices: Knowledge of the impacts of engineering practices on society, health and safety, the economy, sustainability, and the environment within the scope of the UN Sustainable Development Goals (SDGs); awareness of the legal consequences of engineering solutions		-	-	-	-	-
	1	Global Impact of Engineering Practices: Knowledge of the impacts of engineering practices on society, health and safety, the economy, sustainability, and the environment within the scope of the UN Sustainable Development Goals (SDGs)	-	-	-	-	-
	2	Awareness of the legal consequences of engineering solutions	-	-	-	-	-
7	Ethical Behavior: Acting in accordance with the principles of the engineering profession; knowledge of ethical responsibility; awareness of acting impartially and inclusively, without discrimination in any matter. (FENG101)		-	-	-	-	-
	1	Acting in accordance with the principles of the engineering profession; knowledge of ethical responsibility	-	-	-	-	-
	2	Awareness of acting impartially and inclusively, without discrimination in any matter.	-	-	-	-	-
8	Individual and Team Work: The ability to work effectively as an individual and as a member or leader of both intra-disciplinary and interdisciplinary teams (whether face-to-face, remote, or hybrid).		-	-	-	-	-
9	Verbal and Written Communication: Taking into account the various differences of the target audience (such as education, language, profession), particularly in technical matters.		-	-	-	-	-
	1	Verbal (ENGxxx)	-	-	-	-	-
	2	Written effective communication skills. (ENGxxx)	-	-	-	-	-
10	Project Management: Knowledge of business practices such as project management and economic feasibility analysis; awareness of entrepreneurship and innovation.		-	-	-	-	-
	1	Knowledge of business practices such as project management and economic feasibility analysis; (FENG497-FENG498)	-	-	-	-	-
	2	Awareness of entrepreneurship and innovation. (FENG101)	-	-	-	-	-
11	Lifelong Learning: The ability to learn independently and continuously, adapt to new and emerging technologies, and think critically about technological changes.		-	-	-	-	-

IE 375 | Course Introduction and Application Information

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