Postgraduate Course: Risk-Neutral Asset Pricing (MATH11118)
Course Outline
School |
School of Mathematics |
College |
College of Science and Engineering |
Course type |
Standard |
Availability |
Not available to visiting students |
Credit level (Normal year taken) |
SCQF Level 11 (Postgraduate) |
Credits |
15 |
Home subject area |
Mathematics |
Other subject area |
None |
Course website |
None
|
Taught in Gaelic? |
No |
Course description |
Aims:
To provide solid mathematical foundations for pricing derivative products in financial markets, highlighting the points where the idealized and the realistic diverge.
Syllabus:
- Introduction to bonds, futures and forward contracts.
- Options : basics, strategies, profit diagrams and put-call parity
- Risk-neutral valuation of contingent claims. Pricing PDEs.
- Some important option types in the Black-Scholes setting. Parameter sensitivity (Greeks).
- Incomplete markets, pricing and hedging.
- The term structure of interest rates: short rate models (Vasicek, CIR) and the HJM framework.
- Pricing of credit derivatives. |
Entry Requirements (not applicable to Visiting Students)
Pre-requisites |
|
Co-requisites |
|
Prohibited Combinations |
|
Other requirements |
None
|
Additional Costs |
None |
Course Delivery Information
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Delivery period: 2011/12 Semester 2, Not available to visiting students (SS1)
|
WebCT enabled: Yes |
Quota: None |
Location |
Activity |
Description |
Weeks |
Monday |
Tuesday |
Wednesday |
Thursday |
Friday |
No Classes have been defined for this Course |
First Class |
First class information not currently available |
No Exam Information |
Summary of Intended Learning Outcomes
- Familiarity with the fundamental tools of no-arbitrage pricing (Girsanov change of measure, martingale representation).
- Knowledge of most important option types (European, American, exotic).
- Familiarity with the PDE methodology for computing option prices.
- Understanding the essentials of short rate and forward rate models (i.e. HJM).
- Familiarity with the basic credit derivatives and with the problems in their pricing (default sensitivity).
- Understanding the main uses of derivatives in hedging, arbitrage and speculations. |
Assessment Information
Examination 100% |
Special Arrangements
None |
Additional Information
Academic description |
Not entered |
Syllabus |
Not entered |
Transferable skills |
Not entered |
Reading list |
Not entered |
Study Abroad |
Not entered |
Study Pattern |
Not entered |
Keywords |
Not entered |
Contacts
Course organiser |
Dr Sotirios Sabanis
Tel: (0131 6)50 5084
Email: S.Sabanis@ed.ac.uk |
Course secretary |
Mrs Kathryn Mcphail
Tel: (0131 6)50 4885
Email: k.mcphail@ed.ac.uk |
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copyright 2011 The University of Edinburgh -
1 September 2011 6:27 am
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