FIN-503 / 4 crédits

Enseignant: Perazzi Elena

Langue: Anglais

Remark: MA3 only


Summary

The course covers a wide range of advanced topics in derivatives pricing

Content

Keywords

Derivatives, volatility, numerical methods

Learning Prerequisites

Required courses

  • Derivatives
  • Introduction to finance
  • Investments
  • Stochastic calculus

Learning Outcomes

By the end of the course, the student must be able to:

  • Describe properties of asset returns and implied volatility surfaces
  • Compare and contrast different methods for modeling implied volatility surfaces including local volatility and stochastic volatility
  • Price any European-style option using the implied distribution.
  • Design efficient simulation schemes for pricing options with path-dependent payoffs and early exercise features
  • Implement simple finite difference schemes
  • Explain the decomposition of structured products into their underlying option components; understand the model risk associated with pricing and hedging exotic derivatives and structured product.
  • Demonstrate the model-independent pricing of variance swaps; explain empirical results about volatility risk premiums
  • Understand the properties of term structure models and be able to price interest-rate derivatives.

Transversal skills

  • Assess one's own level of skill acquisition, and plan their on-going learning goals.
  • Take feedback (critique) and respond in an appropriate manner.

Teaching methods

Lectures and exercises

Assessment methods

40% combined weight on assignments given during the course

60% final exam - closed-book

Resources

Bibliography

The main textbook for the course is
Jim Gatheral, The Volatility Surface, Wiley, 2006.

 

In addition, a number of journal articles will be used.

Ressources en bibliothèque

Dans les plans d'études

  • Semestre: Automne
  • Forme de l'examen: Pendant le semestre (session d'hiver)
  • Matière examinée: Advanced derivatives
  • Cours: 2 Heure(s) hebdo x 14 semaines
  • Exercices: 1 Heure(s) hebdo x 14 semaines
  • Semestre: Automne
  • Forme de l'examen: Pendant le semestre (session d'hiver)
  • Matière examinée: Advanced derivatives
  • Cours: 2 Heure(s) hebdo x 14 semaines
  • Exercices: 1 Heure(s) hebdo x 14 semaines
  • Semestre: Automne
  • Forme de l'examen: Pendant le semestre (session d'hiver)
  • Matière examinée: Advanced derivatives
  • Cours: 2 Heure(s) hebdo x 14 semaines
  • Exercices: 1 Heure(s) hebdo x 14 semaines

Semaine de référence

 LuMaMeJeVe
8-9     
9-10 EXTRANEF126   
10-11    
11-12 EXTRANEF126   
12-13     
13-14     
14-15     
15-16     
16-17     
17-18     
18-19     
19-20     
20-21     
21-22     

Mardi, 9h - 11h: Cours EXTRANEF126

Mardi, 11h - 12h: Exercice, TP EXTRANEF126