Course objectives:
|
To provide an overview of financial derivatives, pricing and valuations principles, and usage of financial derivatives for financial control.
|
Requirements on student
|
Contents, organization and conditions of exam prior permission :
Own elaboration of problem-oriented project essay individually assigned, which is to be submitted in written form.
Contents, organization and conditions of exam :
Compound exam consists from written test and oral interview, which are focused on checking both theoretical knowledge of the subject and skills to solve practical oriented problems. Exam rank and mark depends upon evaluation of problem-oriented project essay. At the exam mainly matters skills to apply subjects presented in lectures and in selected parts of basic and recommended books, too.
Exam ranking - max. 26 points:
- written test (3 examples) - max. 15 points,
- problem-oriented project essay - max. 5 points,
- oral interview - max. 6 points,
Marks ~ (points): excellent~(21-26), very good~(17-20), good~(13-16), failed~(0,12).
|
Content
|
Risk neutral pricing.
Basics of theory of probability, binomial model.
Arbitrage approach to pricing.
Introduction to stochastic calculus.
Wiener process and its properties.
Ito integral and Ito lemma.
pricing of derivatives.
Black-Scholes model and its derivation.
Delta hedging, implied volatility.
American options and their pricing.
|
Activities
|
|
Fields of study
|
|
Guarantors and lecturers
|
|
Literature
|
|
Time requirements
|
All forms of study
|
Activities
|
Time requirements for activity [h]
|
Contact hours
|
52
|
Graduate study programme term essay (40-50)
|
40
|
Preparation for an examination (30-60)
|
60
|
Total
|
152
|
|
Prerequisites
|
Knowledge - students are expected to possess the following knowledge before the course commences to finish it successfully: |
Understand the following subjects: Financial and insurance calculations 1 (KEM/FIPV1), and Probabilistic models (KEM/PMO).
|
Skills - students are expected to possess the following skills before the course commences to finish it successfully: |
N/A |
Competences - students are expected to possess the following competences before the course commences to finish it successfully: |
N/A |
|
Learning outcomes
|
Knowledge - knowledge resulting from the course: |
get basics of sw Mathematica acquainted. |
understand modern approches and methods in finance based upon stochastic processes- risk neutral pricing
|
use of Wiener process in finance |
option pricing, Black-Scholes model, american option |
Skills - skills resulting from the course: |
N/A |
Competences - competences resulting from the course: |
N/A |
|
Assessment methods
|
Knowledge - knowledge achieved by taking this course are verified by the following means: |
Combined exam |
Seminar work |
Skills - skills achieved by taking this course are verified by the following means: |
Combined exam |
Competences - competence achieved by taking this course are verified by the following means: |
Combined exam |
|
Teaching methods
|
Knowledge - the following training methods are used to achieve the required knowledge: |
Lecture |
Self-study of literature |
Individual study |
Skills - the following training methods are used to achieve the required skills: |
Lecture |
Competences - the following training methods are used to achieve the required competences: |
Lecture |
|