Students
ACST3007 – Quantitative Asset and Liability Modelling 2
2025 – Session 2, In person-scheduled-weekday, North Ryde
General Information
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| Unit convenor and teaching staff |
Unit convenor and teaching staff
Zhuo Jin
|
|---|---|
| Credit points |
Credit points
10
|
| Prerequisites |
Prerequisites
ACST3006
|
| Corequisites |
Corequisites
|
| Co-badged status |
Co-badged status
ACST8088
|
| Unit description |
Unit description
The topics covered in this unit include: an introduction to stochastic processes; martingales; an introduction to stochastic calculus; Ito's lemma; forwards, futures, swaps and options; arbitrage-free pricing via replicating portfolio and risk neutral probability measures; the Girsanov theorem; the Black-Scholes option pricing model for European options; the 'Greeks' and dynamic hedging; term structure of interest rates; relations among short rates, forward rates and default-free zero-coupon bonds; interest rate models; firm-value and intensity-based credit risk models; ruin theory; valuation of basic guarantees. Students gaining a credit average in both ACST3006 and ACST3007 (minimum mark of 60 on both units) will satisfy the requirements for exemption from the professional subject CM2 of the Actuaries Institute. |
Important Academic Dates
Information about important academic dates including deadlines for withdrawing from units are available at https://www.mq.edu.au/study/calendar-of-dates
Learning Outcomes
On successful completion of this unit, you will be able to:
- ULO1: Understand the use of stochastic calculus in modelling security prices and valuation of option pricing approaches.
- ULO2: Demonstrate an understanding of the Black-Scholes option pricing model via both the partial differential equation approach and the risk-neutral pricing approach.
- ULO3: Describe the use of interest models in term of structure modelling and pricing of zero-coupon bonds.
- ULO4: Describe the different approaches to modelling credit risk.
- ULO5: Apply ruin theory to insurance problems.
Assessment Tasks
| Name | Weighting | Hurdle | Due |
|---|---|---|---|
| Professional Practice: Stochastic Models | 20% | No | 5/9/2025 |
| Formal and Observed Learning: Test | 20% | No | 23/10/2025 |
| Formal and Observed Learning: Exam | 60% | No | Exam Period |
Professional Practice: Stochastic Models
Assessment Type 1: Quantitative analysis task
Indicative Time on Task 2: 20 hours
Due: 5/9/2025
Weighting: 20%
The purpose of this assessment is for you to demonstrate your problem-solving skills using Excel for actuarial applications.
You will solve a set of actuarial problems based on content covered in class.
Skills in focus:
- Digital skills (Excel)
- Discipline knowledge
- Work readiness
- Problem solving.
Deliverables: PDF report and Excel worksheet(s).
Individual assessment
On successful completion you will be able to:
- Understand the use of stochastic calculus in modelling security prices and valuation of option pricing approaches.
- Demonstrate an understanding of the Black-Scholes option pricing model via both the partial differential equation approach and the risk-neutral pricing approach.
- Describe the use of interest models in term of structure modelling and pricing of zero-coupon bonds.
Formal and Observed Learning: Test
Assessment Type 1: Quiz/Test
Indicative Time on Task 2: 12 hours
Due: 23/10/2025
Weighting: 20%
The purpose of this assessment is for you to demonstrate your understanding and knowledge of key topics from the unit.
You will participate in a formal invigilated test held during class time. Feedback on this test will help you assess your progress through the unit content.
Deliverable: Test (approximately 90 minutes) during class time.
Individual assessment
On successful completion you will be able to:
- Understand the use of stochastic calculus in modelling security prices and valuation of option pricing approaches.
- Demonstrate an understanding of the Black-Scholes option pricing model via both the partial differential equation approach and the risk-neutral pricing approach.
- Describe the use of interest models in term of structure modelling and pricing of zero-coupon bonds.
Formal and Observed Learning: Exam
Assessment Type 1: Examination
Indicative Time on Task 2: 28 hours
Due: Exam Period
Weighting: 60%
The purpose of this assessment is for you to formally demonstrate the expertise you have gained in this unit.
You will participate in a 3-hour exam held during the University Examination period. Important information about the exam will be made available on the unit iLearn page. You should also review the MQ Exams website for general tips.
Deliverable: Formal exam
Individual assessment
On successful completion you will be able to:
- Understand the use of stochastic calculus in modelling security prices and valuation of option pricing approaches.
- Demonstrate an understanding of the Black-Scholes option pricing model via both the partial differential equation approach and the risk-neutral pricing approach.
- Describe the use of interest models in term of structure modelling and pricing of zero-coupon bonds.
- Describe the different approaches to modelling credit risk.
- Apply ruin theory to insurance problems.
1 If you need help with your assignment, please contact:
- the academic teaching staff in your unit for guidance in understanding or completing this type of assessment
- the Writing Centre for academic skills support.
2 Indicative time-on-task is an estimate of the time required for completion of the assessment task and is subject to individual variation
Delivery and Resources
Notes and tutorial materials will be provided in iLearn
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To find other policies relating to Teaching and Learning, visit Policy Central (https://policies.mq.edu.au) and use the search tool.
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Results
Results published on platform other than eStudent, (eg. iLearn, Coursera etc.) or released directly by your Unit Convenor, are not confirmed as they are subject to final approval by the University. Once approved, final results will be sent to your student email address and will be made available in eStudent. For more information visit connect.mq.edu.au or if you are a Global MBA student contact globalmba.support@mq.edu.au
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Changes since First Published
| Date | Description |
|---|---|
| 17/07/2025 | Specific dates for assessments |
Unit information based on version 2025.03 of the Handbook