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Financial Engineering

Description

Prerequisites
Same as for any standard course in security evaluation.

Objectives
The course provides an introduction into the main instrument to measure, trade and manage volatility in the main segments of financial markets. The lectures combine conceptual analysis with up-to-date market practice in one of the most actively traded asset classes.  

Description / Program
This course provides a grounding in recent developments into the market practice of trading volatility in equity, interest rate and credit markets. By the end of the course, the students will be familiar with a variety of topics, including (i) stochastic volatility (the fact the asset price volatility changes over time); (ii) local volatility (the fact that we may price and hedge exotic derivatives while only relying on already traded plain vanilla derivatives; (iii) expected volatility (the views on the possible occurrence of periods of market turmoil). Expected volatility may be traded through dedicated instruments; it does represent indeed one of the most actively traded asset classes in liquid markets. The students will be familiar with the main concepts, trading tools and instruments in this space, such as: (iv) the equity VIX index (the “fear index” maintained by Chicago Board Options Exchange); (v) options and futures referenced to VIX and their basic pricing models; (vi) fear indexes available for other asset classes such as interest rate swaps, government bonds and credit indices. Finally, the students will be exposed to (vii) tutorials on endogenous volatility, that is, the occurrence of large swings in asset prices resulting from the uncoordinated behavior of market participants in periods of turmoil. These price swings may feed such violent market fluctuations (crashes followed by rebounds) that may likely wash away some of the premiums resulting from the strategies based on the instruments in (v)-(vi). 

Learning Method / Style of Lessons
Regular lectures and classes as well as invited lectures from industry leaders.
Compliant with COVID-19 guidelines

Exam Style
Individual project (65%) and ninety minute written examination (35%) 

Readings/Textbooks
An extensive and dedicated array of Lecture Notes distributed in class. Parts of these notes are taken from a forthcoming book of the lecturer, and the remaining part results from executive education the lecturer has provided in the last five years in venues such as RISK-USA or Chicago Board Options Exchange.

People

 

Mele A.

Course director

Pankratov A.

Assistant

Additional information

Semester
Fall
Academic year
2020-2021
ECTS
6
Language
English
Education
Master of Science in Economics in Finance, Elective course, Minor in Banking and Finance, 2nd year
Master of Science in Economics in Finance, Elective course, Minor in Quantitative Finance, 2nd year
Master of Science in Economics in Finance, Elective course, Minor in Digital Finance, 2nd year
Master of Science in Financial Technology and Computing, Elective course, Lecture, 2nd year