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AC.F605: Derivatives Pricing


Department: Accounting and Finance NCF Level: FHEQ/QCF/NQF7//RQF7
Study Level: Postgraduate (Masters level) Credit Points: 15
Start Date: 14-01-2019 End Date: 19-04-2019
Available for Online Enrolment?: N Enrolment Restriction: Fully available to all students
Module Convenor: Dr X Huang

Syllabus Rules and Pre-requisites

CMod description

  • Students should understand the key concepts for the following topics:

    • Discrete-time vs. continuous-time
    • Expectation pricing
    • Arbitrage pricing
    • Continuous processes
    • Stochastic calculus: Ito's lemma
    • Change of measure: Girsanov's theorem
    • Black and Scholes model
    • Hedging issues: "greeks"
    • Role of complete markets assumption
    • Investment in derivatives
    • Continuous dividends
    • Garman-Kohlhagen
    • Pricing Asian options
    • Pricing other exotics
    • American options
    • Barone-Adesi and Whaley

     

Curriculum Design: Outline Syllabus

  • This course is designed to provide an extensive coverage of methods for valuing derivative securities that are used for pricing purposes in the investment banking industry. Theory will largely be drawn from the set text.

  • 75% Exam
  • 25% Coursework

Educational Aims: Subject Specific: Knowledge, Understanding and Skills

  • This module is designed to provide an extensive coverage of methods used for valuing derivative securities in the investment banking industry including an introduction to stochastic calculus.

Learning Outcomes: Subject Specific: Knowledge, Understanding and Skills

  • Students should understand the key concepts for the following topics:

     

    -        Discrete-time vs. continuous-time

    -        Expectation pricing

    -        Arbitrage pricing

    -        Continuous processes

    -        Stochastic calculus: Ito's lemma

    -        Change of measure: Girsanov's theorem

    -        Black and Scholes model

    -        Hedging issues: "greeks"

    -        Role of complete markets assumption

    -        Investment in derivatives

    -        Continuous dividends

    -        Garman-Kohlhagen

    -        Pricing Asian options

    -        Pricing other exotics

    -        American options

    -        Barone-Adesi and Whaley

     

    Students should be able to:

     

    -        Price a range of different types of options

    -        Compute exposure of a derivative to different market factors

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