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Financial Engineering

People

Mele A.

Course director

Pankratov A.

Assistant

Description

This course provides a thorough grounding in the specific tools used in the industry practice to evaluate and hedge derivative products, relying on no-arbitrage trees and the methods of calibration of the yield curve.

By the end of the course, the students will be familiar with a variety of topics, including the pricing of interest rate derivatives based on (i) implied binomial trees and (ii) Arrow-Debreu state prices, and (iii) the modeling of exotic products through calibration methods relying on SABR models—the workhorse of brokerage houses operating in over-the-counter markets. These methods are developed both in discrete and continuous time.

The source for this course is a comprehensive set of lecture notes, tutorials and case studies, based on Chapters 10 and 11 of Antonio Mele´s Lectures on Financial Economics available online from www.antoniomele.org.

Education