Students Chris Smith and Bryan Wren
Dates of Involvement 2007
Faculty Advisor Jim Curry and Anne Dougherty
In the fall semester of 2006 we jointly completed a project for APPM 4350, Partial Differential Equations and Fourier Analysis, analyzing the Black-Scholes option pricing equation and measuring its accuracy relative to actual market prices. Our project gave a short introduction to the financial background necessary, an in-depth look at the Black-Scholes model and a derivation of the equation. Finally, we wrote the numerical code necessary to analyze the models accuracy relative to the market.
Our proposal for the Mentoring through Critical Transition Points (MCTP) program is to take what was accomplished in our previous work and create two project models to be used by future APPM 4350 course participants. The first model will be based on the work we completed last semester. This model will include a write up of the financial mathematics to be considered by the student, ideas for creating a numerical model to test, information on where the current financial data necessary can be gathered, and ideas for overcoming the inadequate assumptions in the original Black-Scholes equation. The second project model will involve the Black-Scholes equation and implied volatility. This is a common use for the Black-Scholes equations in industry and reveals the “volatility smiles” implied by the options market today.
About Chris D. Smith:
Chris D. Smith is originally from Tyler, TX. He is currently a senior majoring in Applied Mathematics with an emphasis in quantitative finance at the University of Colorado at Boulder. He is a nontraditional student having served a six year enlistment in the U.S. Air Force, where he worked in the field of telecommunications. After leaving the military in April 2000 he settled in Boulder, CO and began working for Level 3 Communications. After graduating in May he plans on finding a position in the quantitative finance field.
His future education plans include studying for the Chartered Financial Analyst exams and graduate school in Applied Mathematics. His particular mathematical interests are probability and applied statistics.
About Bryan Wren:
Bryan is originally from Evergreen, CO. He began school at the University of Colorado as an aerospace engineer and transferred into the Applied Mathematics department his sophomore year. He is now a senior in the Applied Math department and his focus is quantitative finance. He plans to graduate in May and then find a position in the quantitative finance field. He is still have not decided exactly what area of quantitative finance he will pursue, but he has narrowed his choices down to investment banking, equity research, and fixed income research.
At the moment, Bryan is am planning to attend graduate school in the fall of 2010 or the fall of 2011 for a master’s degree in quantitative finance and business administration. He also plans on acquiring his Chartered Financial Analyst certification before he goes to graduate school.