Learning outcomes
RATIONALE
Aim of the course is to provide an introductory overview on
derivative securities with a particular emphasis on interest rate
derivatives and equity type derivatives. A detailed and intuitive
understanding of the basics of derivative pricing models will be
presented. The presentation will always remain at a fairly
elementary mathematical level and the financial intuition behind
all technical discussions will be stressed.
Key Objectives
To provide an understanding of the modelling of interest rate
dynamics and of pricing fixed income securities and derivatives
To provide an understanding of the modelling of price dynamics
of the equities underlying derivative securities.
Course contents
The Term Structure of Interest Rates
Determine the spot rate curve by the prices of the bonds
Non-arbitrage principle and implied forward rates
Semideterministic portfolio immunization
Forwards, Futures, and Swaps
Forward contracts and forward prices
Forward rate agreements
Interest rate swaps
Covered interest rate parity
Future contracts and future prices
A Model of Asset Dynamics
Binomial lattice model: the multiplicative model
Derivatives on Stocks
Call and put options on stocks
Pricing of a generic derivative on a stock: the n-period
binomial model
Readings/Bibliography
Luenberger
D. G., Investment Science, Oxford
University
Press1998
Cesari R., Susini
E., Introduzione alla Finanza Matematica. Mercati azionari,
rischi e portafogli, McGraw-Hill 2005
Cesari R.,
Introduzione alla finanza matematica. Derivati, prezzi e
coperture. Springer 2009
Pascucci Andrea; Runggaldier Wolfgang J.,
Finanza matematica. Teoria e problemi per modelli
multiperiodali, Springer Verlag 2009