Valuation of Derivatives Course

Valuation of Derivatives Course Description

This course covers valuation of derivative instruments, such as forwards, futures and options and their use for hedging and risk management. Prerequisite: FINC 540.

Course Objectives:

To learn how to price derivative securities
To learn how to use derivative securities for hedging and risk management

Course Outline

1. Introduction, Mechanics of Futures markets (1wk.)

2. Futures and Forwards (1 wk.)

a. Hedging Strategies using futures

b. Determination of Forward and Futures Prices

3. Options Basics (2 wk.)

a. Mechanics of Options Markets

b. Properties of Stock Options

c. Trading Strategies involving options

4. Option pricing and hedging (4 wk.)

a. Binomial trees

b. Risk-Neutral Valuation

c. Black - Scholes model

d. The Greeks

e. Volatility Smiles

5. Non standard options (1 wk.)

a. Exotic options

b. Credit derivatives

c. Weather, energy derivatives

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