Derivatives Markets 2400-QFU1DVM
1. IIntroduction to the topic, forwards, futures, interest rate instruments [Ch. 1 – 6]
2. Swaps and options [Ch. 7 – 12]
3. Binomial Trees, Wiener Process, Ito Lemma [Ch. 13-14]
4. Black-Scholes-Merton model [Ch. 15 – 16]
5. Options on Stock Indices, Currencies, Futures Options and Black’s model [Ch. 17 – 18]
6. Greek Letters and Volatility Smiles [Ch. 19 – 20]
7. Mid-term exam
8. Numerical procedures (Trees, Monte Carlo, Finite Difference) [Ch. 21]
9. Risk measures (VaR, ES) Volatilities/correlations (ARCH/GARCH, EWMA) [Ch. 22 – 23]
10. Credit risk, credit derivatives [Ch. 24 – 25]
11. Exotic Options [Ch. 26]
12. Numerical methods part II (CEV, Jump-diffusion, Variance-Gamma, SVM, SABR, IVF, path dependence, barrier options) [Ch. 27] + Martingales [Ch. 28]
13. Interest rate derivatives and models, Hull-White Model, Black-Kararsinski [Ch. 29 – 32]
14. Other topics included in the main textbook depending on time availability
Type of course
Course coordinators
Learning outcomes
After completing the course, students have comprehensive knowledge covering theoretical and practical aspects of derivatives markets. They can distinguish between different types of derivatives as well as assess and measure the risk related to investing in those instruments. Most importantly, students are able to valuate different types of derivatives, using less and more advanced quantitative methods. They will also gain up-to-date, multi-faceted knowledge combined with the current macroeconomic background. (KW_01, KW_02, KW_07)
Assessment criteria
1. Mid-term exam – student needs to pass 50% to be eligible for the final exam
2. Extra assignment/project – student can upgrade their mid-term/final grade up to 10%
3. Final Exam – 100% of the final grade
Bibliography
Obligatory readings:
1. Hull, J. (2015) Options, Futures, and other Derivatives. 9th Edition (or later), Pearson, New York
Supplemental readings:
2. McDonald R.L., Derivatives Markets; Addison Wesley, 2006
3. Whaley R. E., Derivatives: Markets, Pricing and Risk Management; John Wiley & Sons 2006
4. Durbin M., All About Derivatives, 2nd edition (non-academic)
Additional information
Additional information (registration calendar, class conductors, localization and schedules of classes), might be available in the USOSweb system: