Measure and Integration-1

Responsible: M.Manolessou

Teachers: M. Manolessou + Abdessalam El Janati

Teaching Objectives: To give the students a deeper understanding of the theory of Measure
and Integration, following Lebesgue’s work.

Content of Teaching: Introduction to Lebesgue’s Theory of Measure and Integration,

Fundamental Theorems, Applications to spaces of Probability Measures.

Total Hours (lecture, tutorials, practical lab): 20 (10, 10, 0)

ECTS: 2

Program (sessions of 3 hours):

1. s-fields-Measurable Spaces- Filtrations – Measurable Applications. Borel s-Fields. +

Tutorial Introduction to the theory of Measure– Properties -Sets of Measure Zero.

2. Equivalent Measures (Radon-Nikodym Theorem), Measured Spaces, Probability

Measures + Tutorial.

3. Integral and Lebesgue Measure – Lebesgue Integral of positive step functions,

positive measurable functions and general measurable functions functions.

4. Fundamental Theorems: Lebesgues:Monotone and Dominated convergence

5. Product Spaces. Fubini’s Theorem + Tutorial

6. – 7. Lp -Functional Spaces,Orthogonal Projection Properties (+ Applications)+Tutorial

Prerequisites: Analysis + Algebra (Bachelor level), Probabilities

Evaluation: Final examen of 3 hours +Continuous control

Bibliography:

1. P.Billingsley Probability and Measure

2 J. Dieudonné: Foundations of Modern Analysis, Academic Press New York

16
3. B. Friedman: Principles and Techniques of Applied Mathematics, J.Wiley and Sons

4. A. Guichardet: Intégration-Analyse Hilbertienne, Paris X- Polytechnique- Ellipses

5.W. Rudin: Principles of Mathematical Analysis, (MacGraw- Hill Company 1964)

6.A.J.Weir Lebesgue Integration and Measure Cambridge University Press 1988

Partial Differential Equations-1

Responsible: Abdessalam El Janati

Teacher: Abdessalam El Janati

Teaching Objectives:

To give the students the basic elements of PDE theory, and their applications.

Content of Teaching:

Sturm-Liouville Theory. Parabolic / Hyperbolic Partial Differential Equations. Elliptic

Distributions.

Total Hours (lecture, tutorials, practical lab): 30 hours (10h, 20, 10)

ECTS: 3

Program (sessions of 3 hours):

1. Introduction. Classification of PDE of second order

2. Elements of the Sturm-Liouville Theory

3. Parabolic Equations. Part I. Boundary problems.

4. Parabolic Equations. Part II. Boundary problems. Green’s Function.

5. Parabolic Equations. Part III. Fundamental Solution.

6-7. Hyperbolic Equations. Wave Equation. Elliptic Equations. Laplace’s Equation. Green’s
Function.

8-9-10. Test Functions. Distributions. Operations on Distributions. Convergence. Derivation and

integration of distributions. Convolution operators. Fourier transform for distributions.
Fundamental Solution and Sobolev Spaces. Lax-Milgram Theorem.

Prerequisites: Algebra Analysis (Bachelor level)

Evaluation: Exam of 3 hours

Bibliography:

A. PINSKY: Introduction to partial differential equations with applications, McGrow-Hill Book

Company, 1984

A.N. TYCHONOV, A.A. SAMARSKI: Partial differential equations of mathematical physics.

Volume I, Holden-day, Inc, 1964

I.G. PETROVSKY: Lectures on Partial Differentiel Equations, Dover Publications, Inc, 1991

J. KEVORKIAN: Partial differential equations. Analytical solution technics, Springer, 2000

Stochastic Processes (Discrete and Continuous Time)-1

Responsible: M.Manolessou

M. Manolessou, Irina Kortchemski

Teaching Objectives: to give the students a deeper understanding of the theory of discrete
and continuous time Stochastic Processes and their applications.

Content of Teaching:

Discrete Time Stochastic Processes: independent and stationary increments, Markovian

Processes (Markov Chains, Poisson Process, Martingales, Stop Time, Snell’s Envelope and
Applications)

Continuous Time Stochastic Processes with independent and stationary increments,

Martingales, Brownian Movement, Doob-Meyer Decomposition, Stochastic Integral (Itô),
Stochastic Differential Equations, Stochastic Optimal Control, Bellmann, HJB

Total Hours (lecture, tutorials, practical lab): 55 (29h, 26h, 0)

ECTS: 5,5

Program (sessions of 3 hours):

1. (Reminders) Convergence of random variables, random Vectors,Tranformation properties,

Conditional expectation values, Gaussian vectors, L² Spaces, Orthogonal Projection, Filtrations.
Reminders on the measures of the Radon-Nikodyn Theorem. + Tutorial

2-3. Discrete time Stochastic processes with independent and stationary increments.
Filtrations; Poisson Process. + Tutorial
4-5. Markov Processes (discrete time), Markov Chains (homogenous chains and associated
graphs; transition matrix; dynamic evolution of a system, represented by the process and
stability; Equivalence classes (Absorbtive-recurrent and Transitve))+Tutorial

Markov Chains (follow-on): Ergodic Theorems – Foster Criteria, Mean time of first return,
Absorbtion probabilities by Recurrent classes + Tutorial

6-7. Discrete time Martingales (Application: Binomial Model); Quadratic Variation; Doob
Meyer decomposition of sub-Martingales, Compensated Poisson Process.

8. Stopping Time, Stopped Processes, Snell Envelope and Applications + Tutorial

9-10. Continuous time Stochastic Processes, Filtrations– Martingales – Stopping Time – Doob
Meyer decomposition of sub-Martingales, Quadratic Variation (Compensator) and Crossed
Variation (Doob-Meyer) + Tutorial

11-12. Continuous time Stochastic processes with Independent and Stationary Increments.
Brownian Motion, Brownian Vectors, Martingale Representation, Exponential Martingale. +
Tutorial

13-14. Stochastic Integrals, Diffusion Processes, Stochastic Differential Equations, Itô’s Theorems
in one and several dimensions. + Tutorial

15. Girsanov’s Theorem - Applications - Solution- Feynmann Kac. Black Scholes model+
Tutorial

16-17-18. Discrete and Continuous Optimal Control (Deterministic and Stochastic) following
Bellmann. Hamilton Jacobi Bellman equation (H.J.B.)

Bibliography:

1. P. Bremaud “Introduction aux probabilités” Edition : Springer et Verlag

2. P. Billingsley “Probability and Measure” (Wiley Series In probability 1995

3. T.Bjork " Arbitrage Theory in continuous time " (Oxford University Press.

4.I Karatzas - St.E.Schreve ``Methods of mathematical Finance'', Springer, 1998

5 I.Karatzas - St.E. Schreeve "Brownian Motion and Stochastic Calculus" (Springer 2me
édition)
6. D. Lamberton, B. Lapeyre: ``Introduction au calcul stochastique appliqué à la finance''
Ellipses, Paris (1999)

7. T.L.Saaty “Mathematical methods of Operations Research”

8. Setti- Thompson “ Optimal Control Theory” (Springer) (Dover)

9. P. Wittle

“Time Dynamic Programming and Stochastic Control” (Vol.1 John,-Wiley and Sons N.York
(1982)
10. W.L. Winston: Operations Research Applications and Algorithms, (W.S.Kent and
me
Duxbury Press Belmont 3 ed. 1994)
Monte-Carlo Simulation-1

Responsible: M.Manolessou

Teachers: M. Manolessou and I. Kortchemski

Teaching Objectives: Learning and application of different types of Stochastic

process Simulation.

Content of Teaching: Simulation of discrete and continuous random variables. Monte Carlo
Integration. Simulation of the Brownian movement and the associated financial mathematical
models.

Total Hours (lecture, tutorials, practical lab): 30 (10, 10, 10)

ECTS: 3

Program (sessions of 3 hours):

1. Reminders on discrete and continuous random variables + Tutorial

2. The role of the Uniform (Random) law in the simulation of discrete random
variables (fundamental theorem) + Tutorial

3. Simulations and estimations of parameters – mean and variance + Tutorial + Practical Lab

4. Simulation of continuous random variables, with an explicit repartition function;

variance reduction + Tutorial + Practical Lab

5. Simulations and estimations of parameters – mean and variance + Tutorial + Practical Lab

6. Two simulation methods of the Normal random variable + Practical Lab

7. Simulations and estimations of parameters – mean and variance + Tutorial + Practical Lab

8. Two simulation methods of the Brownian movement + Practical Lab

9. Tutorial + Practical Lab (Simulation)

10. Tutorial + Practical Lab (Applications)

Prerequisites: Basic Probabilities and Stochastic Processes (Brownian Movement)

Evaluation: Project

Bibliography:

24
 Syllabus of Master Quantitative Finance and Risk Management (QFRM)

1. .A.O. Allen: Probability - Statistics and Queuing theory with Computer Scheme
Applications, (Acad. Press 1990)

2. P. Bremaud: Introduction aux probabilities, Edition: Springer et Verlag

3. R. Faure - A. Api: Guide de la Recherche Operationnelle, (Masson)

4. B.D. Ripley ``Stochastic Simulation'' (Wiley 1986)

5. S.M. Ross: Initialisation aux probabilities, (Press Univers. et Polytechniques

Romandes Diffusion)

6. W.L. Winston: Operations Research Applications and Algorithms, (W.S.Kent and

me
Duxbury Press Belmont 3 ed. 1994)

Bloomberg Trading Room-1

Teacher: Yalçin Aktar

Teaching Objectives : Using the practical labs with mathematical exercises, give the students
some applications of Bloomberg in Option Pricing, Implicit Volatility, Fixed Income, Portfolio
Risk Management.

Total Hours (practical labs, project): 30

ECTS: 3

Program (sessions of 2 hours):

Practical Lab 1 Introduction to Bloomberg

Practical Lab 2 The Stochastic Volatility Model

Practical Lab 3 Option Pricing

Practical Lab 4 Implied Volatility

Practical Lab 5 Fixed Income

Practical Lab 6 Portfolio Risk Management

Project
Prerequisites: Mathematics, bachelor level, Stochastic Processes, Finite Difference Methods,
Numeric Analysis

Evaluation: graded practical labs + project

Bibliography: Theoretical Courses of Master Quantitative Finance and Risk Management

Introduction to Quantitative Finance-1