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
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
Assessment Methods: Due to covid, assessment methods for Academic Year 2021-22 may vary from those noted on the official course descriptor. Please see the Computer Science Course Weightings and the Maths Course Weightings for 2020-21 Semester 1 assessment methods.
SCQF Level: 11.
Credits: 15.
Other Information
Help: If you have any problems or questions regarding the course, you are encouraged to contact the lecturer
Canvas: further information and course materials are available on Canvas