Math 176. Math of Finance. Lecture 01.

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UCI Math 176: Math of Finance (Fall 2014)
Lec 01. Math of Finance
View the complete course: ocw.uci.edu/courses/math_176_m...
Instructor: Donald Saari, Ph.D.
License: Creative Commons CC-BY-SA
Terms of Use: ocw.uci.edu/info
More courses at ocw.uci.edu
Description: UCI Math 176 covers the following topics: reviewing of tools from probability, statistics, and elementary differential and partial differential equations, concepts such as hedging, arbitrage, Puts, Calls, the design of portfolios, the derivation and solution of the Blac-Scholes, and other equations.
Recorded on January 7, 2014
The notes for this course, Math 176, Mathematics of Finance, have been published as a book:
Saari, Donald G. (2019). Mathematics of Finance: An Intuitive Introduction. Springer.
ISBN-10: 3030254429
ISBN-13: 978-3030254421
This book is copyrighted and is not covered by a Creative Commons license.
Required attribution: Saari, Donald. Math 176 (UCI OpenCourseWare: University of California, Irvine), ocw.uci.edu/courses/math_176_m.... [Access date]. License: Creative Commons Attribution-ShareAlike 4.0 United States License. (creativecommons.org/licenses/b....

Опубликовано:

30 янв 2014

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Комментарии : 149

@MarvelGirl100 9 лет назад

Wow If I only had a professor that was concerned about ensuring his class understood the material. He is a rare breed.

@jamesha6419 6 лет назад

16:20 Starts lecture

@Christianrecoba 5 лет назад

Just watched the start of this lesson, I already like the professor A LOT

@NotthatRossKemp 5 лет назад

This lecturer is awesome, he doesn't just throw formulas at you, he gives you practical worked examples. Fantastic lecture!

@brianclark4796 9 лет назад

This guy is a rare breed. Very productive in his field and someone who wants to pass along knowledge. When I was a penn most professors would claim "not to care if we learned anything." Never understood why they taught, but either way it is refreshing to find someone who does.

@user-hc3df8sy3c Год назад

damn this is really good. i thought he wont be able to cover much in a short duration but just one lecture feels like a lot cause its filled with his extensive knowledge. thanks for making this available to us!

@prkshah1 7 лет назад

Excellent, Reminds me my teachers teaching me 1962. I am rusted but I can understand clearly. I wish him many thanks.

@AdyanAhmed-qu2ry Год назад

I love how raw he is with his intent

@LetMeRetort 10 лет назад

Introducing Dr. Saari as "Donald Saari, Ph.D." in the description here is a massive understatement. I mean he has a wiki page on him. I am pretty sure he must be too modest to put even the PhD next to his name. But still... He is a legend and, as one would see by watching these lectures, an amazing educator.

@ladyg3nius 10 лет назад

do you attend his classes?

@MrAcenit 8 лет назад

Wonderful Lecture! Thank you so much!

@Munk-tt6tz 2 месяца назад

Bought his book just to support him, amazing Professor.

@andywang4189 Год назад

Both the lecture and lecturer are awesome!

@gatorflight74 6 лет назад

I can listen to this man all day! Wonderful professor!

@nicolasmanelli7393 2 года назад

This professor is amazing

@mikerigel7887 3 года назад

Hope I could have a professor excellent as him in college

@saljahagirdar654 9 лет назад

I wish my school had a professor like this.

@ab8682 4 месяца назад

fantastic lecturer, really knows how to teach

@janesa5097 6 лет назад

i like his teaching style.

@adamtornqvist8985 3 года назад

Love this guy.

@mugishafidele6792 6 лет назад

Amazing PROFESSOR

@QrayzHD 10 лет назад

This is great.

@KeithBassJr. 8 лет назад

Dr Saari is really good...I wish I would have known about him when I took my finance courses maybe I would have transferred to the west coast..Lol

@juliohernandez2874 3 года назад

awesome teacher

@ayoubelmezughi5098 7 лет назад

Please can any one tell me which textbook he uses?

@juliopaniagua8723 5 лет назад

Anybody got the course material online and legible? Or knows where to buy it (online version)?

@donaldbanda3578 Год назад

Amazing ..thank you for sharing this

@mahmoudaymo 6 лет назад

Where could I get the homeworks and lecture notes?

@42svb58 5 лет назад

This is a great set of modules! These are not taught as a separate class at my university. Instead, you learn as you go with the other material...so it is a sink or swim approach. It seems a lot of people are looking for a book. I recommend An Undergraduate Introduction to Financial Mathematics , Third Edition - J Robert Buchanan

@navaneethms Год назад

Are you a math student?

@MrAcenit 8 лет назад

Any way we can get the book chapters?

@untwerf 6 лет назад

Hi UCI.. can you please provide me with the reading list associated with this course?

@hamzataoufiki5438 4 года назад

where can i find the materiel of these lectures ?

@LearnEnglishwithTrev 2 года назад

Wow inspiring 👏✨

@Regalert 6 лет назад

I like this professor! Lucky americans.

@mrsbrainmathguy9959 8 лет назад

any body know what is the textbook of this course???

@jackyang6194 8 лет назад

Anybody knows where to get lecture notes and other learning materials?

@setokaiba7204 5 лет назад

Krassimir petrov Khan academy Kauserwise All in youtube

@atkinsj24 6 лет назад

Anyone here know the math requirement in order to gain understating from this course?

@rajumondal4283 2 года назад

he makes sure to tell everyone that everyone will get a job after this course no matter what happens

@FlipHackingRealEstate 2 месяца назад

great intro for finance (starting at 16:20)

@nicholassismil3823 7 лет назад

anyone know the text book used for this course? or if there is a syllabus provided? thanks.

@enisten 3 года назад

Sorry for the late reply. He's using his own book: ocw.uci.edu/courses/math_176_math_of_finance.html

@tuned_loop_labs 7 месяцев назад

What if the the "Profit Curves" intersect below the horizontal line? How do you call that?

@rajumondal4283 2 года назад

what books i should pick up for this course

@jamesgodfrey1729 9 лет назад

It would be nice if people like Prof Saari could go into poor urban areas and teach people legitimate ways of getting rich, or at least accumulating wealth an honest way. I think it would greatly decrease crime etc.

@M_Lopez_3D_Artist 2 года назад

YES i agree with that

@AlamKhan-dj8qf 3 года назад

Wow. Sir, let's me know about finance mathematics. I'm a mathematic student but I wanna to do my MS or PhD in finance mathematics. Sir tell about its scope and importance ? I very very thankful to your kind response.

@gregoryfenn1462 7 лет назад

Which grade/year is this? It looks like super basic maths.. Guessing it's fresher/first year?

@concrete182 3 года назад

What math prerequisites do I need to know to understand this course? Thanks

@rajumondal4283 2 года назад

i think statistics and calculas

@yungaudacity8613 6 лет назад

How does he get -9/4 x by 23:52

@derhotcenplotz3464 3 года назад

Haha! I like this hedging example!

@EvaSlash 9 лет назад

15:00 lmao he said make sure there are no free riders.

@setokaiba7204 5 лет назад

Leadership mothernature!

@maxfob3899 5 лет назад

1:08:30 He said that if the sum of the probabilities for me is smaller than 1, then I can take advantage of the situation. How can I take advantage of that situation? Please does anybody get the intuition here? Thank you.

@tonyzou648 4 года назад

look this : p(d win ) + p (d los) < 1, then p(d win) + 1 - p(s win) < 1 , then p(d win) < p(s win). So you got a answer that the probability of s win is large than d. you can take the advantage of course. Then if you take x dollars on this bet, your expected gain is x * (p(s win) - p(d win)) .

@lastcat12 10 лет назад

Can anybody give the website for Problem Sets and exams..and textbook for thsi course

@beaker071 7 лет назад

Sadly I was only able to find material in www.coursehero.com but you have to pay a subscription to get the docs...www.coursehero.com/file/14487056/Chap1pdf/?key=fPqaDECR6bawYAh2VxaDMasz9tDrqYz9

@ladyg3nius 10 лет назад

where can i find the written notes please? Best teacher ever!

@melanyheckyeah2622 10 лет назад

were you not paying attention? He said at the end he has no notes

@amanshishodia912 5 лет назад

Oh My God Oui Hey! can you send them to me?

@amanshishodia912 5 лет назад

@Oh My God Oui oh okay! He is really amazing professor. I wish I could also get the notes. Thanks for the info :)

@amanshishodia912 5 лет назад

@Oh My God Oui thank you! The shipping cost is really high. Btw is it a book or they are notes?

@jaycee9153 5 лет назад

@@amanshishodia912 It's not a book, it's notes for sale at the bookstore on campus.

@lincha3216 8 лет назад

if the two sides know i took advantage of them, how will they adjust their odds with me?

@sueton1797 3 года назад

maybe a little bit late: if the two sides know eachother they adjusting their odds.

@leleland8 6 месяцев назад

Man, I wish I had this professor and his teaching style in my undergrad (15 years ago). Does anyone know where can I find the solutions to the exercises from his book Mathematics of Finance: An Intuitive Introduction?? I am learning independently. Many thanks in advance.

@therfnoob7697 3 года назад

@13:58 lol, scary... what did that guy had in his hands?

@user-gt7lz2cn3f 3 года назад

A calculator

@simple_boy_tanvir 4 года назад

I seen from Bangladesh. 15-3-2020

@arrowb3408 Год назад

OMG...this video was JUST 8 YRS AGO.... The light was too dark and I became wondering how bright the light in my auditorium class was then.

@theprestige22 8 лет назад

what does it means no money changes hands until the match is over? why he give evidence of this point? ty

@jsoncoding1025 7 лет назад

10 months ago but he just means if u were to bet at a sports place or whatever with 50$ u would have to pay the $50, if u do that wont have another 50 with which to bet o another thing to facilitate the hedge, no money changes hands just means u basically issue a verbal contract to make the payments without paying the money so that when u win and loose u then just take your winnings and pay off the losses

@backcountyrpilot 10 месяцев назад

“Put that away please. Do that again, you won’t be here.”🚀

@Kenneth_the_Philosopher 9 лет назад

Jeff Moore The expected value, in this case, is that there will be a five dollar lost per trial in LONG RUN. Ten trials is not enough trials to demonstrate the LONG RUN expected outcome. If I misunderstood you, please explain in details.

@neobourgeoischristum5540 7 лет назад

finance, the sapien jello dance, a circulation of jollies.

@gg-eo5ln 3 года назад

sorry ahead of time but why does he choose p(sd) =4/9 and p(d) = 3/9 when showing the arbitrage opportunity> i thought it would be sd(2/3 or 6/9) + d(5/9) = ....... in this case it would guarantee a loss????????????

@akashgupta-uj8vy 8 лет назад

can anyone tell me what are perquisites of this course?

@lennon_richardson 8 лет назад

Probably math 111, but it would depend on the University system.

@akashgupta-uj8vy 8 лет назад

+Lennon Richardson if I want to attend these lectures online only, what do I need to know already in order to understand these lectures fully?

@lennon_richardson 8 лет назад

I can't say for sure because I've only watched the first lecture, but I suspect you will need to understand business statistics and basic economic and financial terms.

@satioOeinas Год назад

Calculus and stats/probablity

@jds3816 8 лет назад

Why is it their an advantage if the sum of the probabilities is less than one??

@jds3816 8 лет назад

+Joseph Stanton there*

@William_Webber 2 года назад

man i was not on his lecture andi had chills i am glad i am in shit univercity for some reason lmao

@Convexhull210 7 лет назад

This guy is funny

@topvisuals7513 3 года назад

Search for QUADRATIC EQUATIONS by Crunching Numbers

@brainstormingsharing1309 3 года назад

👍👍👍👍👍👍👍

@xoppa09 8 лет назад

i think he used the word upset wrongly if san diego has the higher odds to win, then san diego losing would be an upset not denver losing

@gabrielmarianosantos3992 4 месяца назад

What was that on 14:00 no need for being rude

@adilhaddouch5755 8 лет назад

why if denver loose , he 's gonna loose 2 dollars. didn't understand the logic :s

@tonyzou648 4 года назад

The key point is that the money will pay out until the bet is done . 0 = p(s) * 1 (when the bet is done, you will win 1 dollars if s win)+ p(d) * (-2 , when the bet is done you need give out 2 dollars if d win) . The other thought is that you have an initial payout 2 dollars . If is the fair bet ,then you will get back 2 dollars not 0. Then 2 = p(s) * (2+1 you get 3 dollars back when s win ) + p(d) * (0 you get nothing ) then ps = 2/3.

@meri5731 7 лет назад

utilize ur knowledge: can u guys please calculate the total resources use in all the buildings we have in the country? can you guys please calculate the TOTAL water, energy and ice use in the ice bucket challenge around the world or in America? and where did all the water go? how much evaporated and where to?

@ntuthukomlambo5476 7 лет назад

Lmao you are special.

@lincha3216 8 лет назад

He's good at teaching

@jsoncoding1025 7 лет назад

real shit.... if i had him id be so intrigued and challenged

@tusharsachdeva3654 2 года назад

Why is he such a badass? 😂

@RosemaryKCire 8 лет назад

WOW!! Would you be my profesor?? I go to Universidad Veracruzana in Mexico, but my teacher isn´t good as you.

@nanobot81 7 лет назад

this guy made my broke in my trading account.

@gregoryfenn1462 7 лет назад

You must have not been paying much attention then.

@shubhamjain8764 4 года назад

Why -5/4 (100-x) and not 5*(100-x)

@patricks9057 4 года назад

Because the odds were 1.25:1 and not 5:1

@angelabakloyvovtchaikovsky1609 3 года назад

Cheat sheet. You get notes for the exam

@ShaikhMohammedYunus 8 лет назад

is he taking 100 into equation because thats the maximum amount to bet??

@lennon_richardson 8 лет назад

We are a poor student and we only have $100

@labaxiao344 Месяц назад

Too bad there are no answers to the exercises

@normaaliihminen722 2 года назад

Holy Moly I'm surprised that lecturer Is Finnish just like me.

@satioOeinas Год назад

Finnish American

@MITmathnico2 9 лет назад

If no money changes hands before after the game, how come it matters how many money you have to begin with? I mean, why can't you just bet X on bet 1 and (Y-X) on bet 2, where Y is arbitrary large? If no money changes hands, then why can we just bet X and 10,000 - X and then win big?

@MITmathnico2 9 лет назад

Furthermore, With this principle, then you can win whenever you get 1 : 1 and anything >1 : 1, this seems wrong, right?

@jalalabdulrahman6530 9 лет назад

MITmathnico2 With the odds given, you win no matter what. In reality those odds are never given. It doesn't matter if money is exchanged before hand or not the outcome is the same. In reality with real odds, you have to take some risk and whether you pay or or promise to pay, the outcome will be the same

@iceyred6668 2 года назад

volume creative model ii lab ...///Nd.D

@_rmaze_quiambao5215 7 лет назад

That is the biggest whiteboard I've ever seen.

@angelabakloyvovtchaikovsky1609 3 года назад

I can tutor math. I was a math major. It's easy for me. I have extra time. Online tutoring???

@Form_Evolve_Invent_India 10 месяцев назад

The casino will always loose

@radoslavivanov8463 Год назад

Who has started betting after first lecture? :D

@andrewlei2980 8 лет назад

I have a thought. This arbitrage betting system won't work in real life because betting companies will charge you a fee. This fee will be greater than the money you win from the arbitrage. Thus you cannot make a profit. Can anyone correct me if I'm wrong or give some insight to the statement

@dnlisak 8 лет назад

Depends on how much you bet

@dnlisak 8 лет назад

Also the broker that is charging the fees

@sunsummer1843 8 лет назад

Yes, and no. The example can never happen in real life, that's true, but not because of the fee. Since no money exchange before hand, why not use leverage to bet 1 million dollar with both guys? If SD wins, you get 2 million from G and lose 1 million to K, ur profit is 1 million; if Denver wins, you lose 1 million to G and win 1.25 million from K, ur profit is 0.25 million. The more you bet, the more u will get. The situation itself cannot happen in real life! Not because of the fee.

@sunsummer1843 8 лет назад

In real life, they always require money exchange before hand. And the profit from one guy can never cover the lose to the other guy. There is never arbitrage opportunity, and that's how betting companies make money.

@Paltibenlaish 6 лет назад

I am with you @Sun Summer, this professor has a bought stocks of a betting company.... or maybe its drunk

@nikhilfci Год назад

I scared of him even when watching this in you tube😮

@Marmelademeister 5 лет назад

11:27 If you’re at a German university, forget this. If you have no paperwork, you have a problem. Even if the professor believes you, that doesn’t matter. Bureaucratic assholes everywhere.

@TT0ny_ 4 года назад

Not assholes, that's just how Germany works. Most of the time I hate it, but sometimes I love it about Germany.

@mellandahabeenzu310 5 лет назад

mozabimgwe

@sunsummer1843 8 лет назад

The example is totally wrong!!!! Since no money exchange before hand, why not bet 100 dollars with both guys? So that we can get profit of either 25 dollars or 100 dollars. Because this is an arbitrage, which means no risk, we can bet as much as we want, bearing no chance to lose. We can bet 1 million with both guys, and we can never lose.

@lennon_richardson 8 лет назад

Because we only have $100 available.

@sunsummer1843 8 лет назад

+Lennon Richardson If no money exchange before hand, then there is arbitrage opportunity. Arbitrage doesn't need money. Even we have no money, we can still arbitrage.

@lennon_richardson 8 лет назад

Yes you are right. We would simply go to our debtor, the person we beat, and collect our money first. Then pay off our debt from the other person. Very good point.

@dodgingdurangos924 2 года назад

But the net economic profit is either zero or negative (a loss). If you bet $100 in both markets: A) If you win the 2-to-1 odds bet, you have a $100 net profit here, but a $100 loss from the other bet. That's zero total economic profit. Another way to say it is you lost $100, but you made that $100 back in this bet. You break even. Or, B) If you win in the market offering 1.25-to-1 odds, you have a net profit of $25 here, but you lost $100 in the other bet. That's a total loss of $75.