The course aims at providing the basics for the pricing of financial derivatives and their use for hedging strategies
Description / Program
The program of the course comprises an introduction to derivatives and three main building blocks: 1) Mechanics of futures markets; hedging strategies using futures; pricing of forwards and futures on stocks, stock indices, currencies, commodities. 2) Mechanics of options markets; properties of stock options; trading strategies involving options; option pricing with binomial trees; option pricing with the Black-Scholes-Merton model; options on stock indices and currencies; the Greeks and hedging of options; 3) Interest rates; bond pricing; forwards and futures on interest rates; interest rate swaps; currency swaps; valuation of swaps.
Learning Method / Style of Lessons
Lectures and exercise sessions
Compliant with COVID-19 guidelines.
Optional Midterm 50%, Final Exam 50-100%
Grading is based on an in-class, closed-book exam
J. Hull, Options, futures, and other derivatives, Pearson-Prentice Hall, 2018, tenth edition