Discrete Time Finance
Dr. Christian-Oliver Ewald
School of Economics and Finance
University of St.Andrews

These are Lecture Notes for a course in Discrete Time Finance which the author taught in the Winter term 2005 at the University of Leeds.

Contents
1 Single Period Market Models 2
1.1 The most elementary Market Model . . . . . . . . . . . . 3
1.2 A general single period market model . . . . . . . . . . . 14
1.3 Single Period Consumption and Investment . . . . . . . . 37
1.4 Mean-Variance Analysis . . . . . . . . . . . . . . . . . . . 52
1.5 Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
2 Multi period Market Models 67
2.1 General Model Specifications . . . . . . . . . . . . . . . . 67
2.2 Properties of the general multi period market model . . . 77
2.3 The Binomial Asset Pricing Model . . . . . . . . . . . . . 89
2.4 Optimal Portfolios in a Multi Period market Model . . . . 97