F71DV Derivatives Markets and Pricing

Dr Anke Wiese

Course co-ordinator(s): Dr Anke Wiese (Edinburgh).

Aims:

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.

Summary:

  • Introduction
  • 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

Detailed Information

Course Description: Link to Official Course Descriptor.

Pre-requisites: none.

Location: Edinburgh.

Semester: 1.

Reading list:

HULL, J. C. (2012). Options, Futures and Other Derivatives, 8th edition.Prentice Hall

Baxter, M. and A. Rennie (1996). Financial Calculus.Cambridge University Press

SCQF Level: 11.

Credits: 15.

Other Information

Help: If you have any problems or questions regarding the course, you are encouraged to contact the course leader.

Canvas: further information and course materials are available on Canvas