The pros and cons of discrete time models are as follows.

The good thing about a

discrete time model is that it's simple.

We can introduce all important concepts with very easy mathematics.

Much less sophisticated mathematics than is

necessary for the continuous time model.

The problem with discrete time models is

there are no closed form solutions possible.

Solutions are not as elegant as those available for continuous

time models, and one has to resort to numerical calculations.

This used to be a problem

when computation was hard, and you couldn't

do sophisticated comput, computation on simple machines.

But as the price of computers have been coming down, people have tended

to move more and more into discrete time models because they are simpler.

You can introduce all kinds of interesting effects and compute

them, rather than trying to look for a closed form solution.

The focus of this course will be on discrete time multi-period models.

We want to keep the mathematics simple, and yet be able to introduce all

the concepts that are necessary, for you

to understand financial engineering and risk management.

There is a little bit of a caveat.

Very, very few continuous time concepts will be used.

For example, the Black-Scholes formula, which comes from continuous time

analysis will be introduced because this is a very classic formula.

And anyone graduating from a course on financial engineering and

risk management, ought to know this formula.