In the light of recent events, it may appear that attempting to model the behaviour of financial markets is an impossible task. However, there are mathematical models of financial processes that, when applied correctly, have proved remarkably effective. Angus Brown looks at one of these, a simple model for option pricing, and explains how it takes us on the road to the famous Black-Scholes
equation of financial mathematics, which won its discoverers the 1997 Nobel Prize in Economics.
Rupa Patel never wanted to be a financial engineer — she wanted to be a maths teacher. However, her skills in conveying difficult mathematical concepts to others, as well as a love of maths, enticed her into the exciting field of financial mathematics. Now she models risk, travels Europe and occasionally finds time to herself to examine the maths of her job in detail.