Derivatives (2013/2014)

Course code
4S02483
Name of lecturer
Andrea Berardi
Coordinator
Andrea Berardi
Number of ECTS credits allocated
9
Academic sector
SECS-S/06 - MATHEMATICAL METHODS OF ECONOMICS, FINANCE AND ACTUARIAL SCIENCES
Language of instruction
Italian
Location
VERONA
Period
primo semestre dal Sep 23, 2013 al Jan 10, 2014.

Lesson timetable

primo semestre
Day Time Type Place Note
Tuesday 11:50 AM - 1:30 PM lesson Lecture Hall Offeddu  
Thursday 3:40 PM - 6:10 PM lesson Lecture Hall Offeddu  

Learning outcomes

The course focuses on applied mathematical models for derivative pricing.
Practical computer sessions are planned.

Syllabus

1. Forward and Futures
Valuation models for the pricing of forward and futures contracts on stocks, stock indices, currencies, interest rates and bonds. Cheapest-to-deliver calculation.
2. Options
Black-Scholes-Merton valuation models and extensions for the pricing of options on stock indices, currencies and futures. The "Greeks": delta, gamma, theta, vega, rho. Risk management of option portfolios: delta hedging, delta-gamma-vega hedging.
3. Swaps
Valuation models for interest rate swap and currency swap contracts.
4. Interest rate options
Standard valuation models for caps, floors, collars, swaptions.
5. Credit derivatives
Standard valuation models for credit default swaps.
6. Stochastic term structure models
Equilibrium models: Vasicek and Cox-Ingersoll-Ross. Pure non-arbitrage models: Ho-Lee and Hull-White. Trinomial trees for the pricing of zero coupon bond options, caps and floors.
7. Real options
Trinomial tree valuation of investment projects.

Reference
J. HULL, Options, futures, and other derivatives, (VIII edition). Prentice Hall, 2012.
(chapters 1-18, 24, 28, 30, 34).

Assessment methods and criteria

Written exam.