Course content
The course deals with the properties, the applications, and the pricing of derivative securities. More specifically, the topics include
- general properties, applications, and pricing results for forwards and futures
- option strategies
- review and refinements of binomial models
- introduction to continuous-time option pricing: Brownian Motion, Itô's Lemma, Black-Scholes PDE
- the Black-Scholes option pricing model
- extensions of the Black-Scholes model such as the Heston model
- the Black 76 model for options on forwards/futures
- hedging strategies and the "Greeks"
- volatility smiles
- tree-based interest rate models
- continuous-time interest rate models
- pricing of interest rate derivatives (such as bonds, swaps, futures, options on bonds, caps, floors, swaptions)
- Monte Carlo simulation
Excel is used wherever relevant.
See course description in course catalogue