Course co-ordinator(s): Dr Anke Wiese (Edinburgh).
This course provides an introduction to the traded and over-the-counter derivatives markets and the principles of no-arbitrage pricing. Students will also be introduced to mathematical concepts related to stochastic processes. The Cox-Ross-Rubinstein model and the Black-Scholes-Merton model for derivative pricing will be introduced.
- Forward contracts, European and American options, over-the counter and exchange-traded derivatives
- Options: basics, strategies and profit diagrams
- Properties of derivative prices: forward pricing with and without dividends, put-call parity
- Futures contracts
- Bond and interest-rate derivatives
- Exotic options
- Single period derivative pricing
- Mathematical foundations of multi-period derivative pricing
- The Cox-Ross-Rubinstein model
- The Black-Scholes-Merton model
Course Description: Link to Official Course Descriptor.
HULL, J. C. (2012). Options, Futures and Other Derivatives, 8th edition.Prentice Hall
Baxter, M. and A. Rennie (1996). Financial Calculus.Cambridge University Press
Derivatives Markets and Pricing will be examined by coursework counting towards 20% of the final mark and a 2-hour examination counting towards 80% of the final mark.
SCQF Level: 11.
Help: If you have any problems or questions regarding the course, you are encouraged to contact the lecturer
VISION: further information and course materials are available on VISION