| Description |
Format: Presence teaching in lectures and tutorials
Futures (relationships between continuously accumulated and
periodically paid interest rates, forward interest rates, idea and
terminology of futures contracts, optimal hedge ratio, hedging using
futures, futures prices for non-dividend paying stock, futures
prices for dividend paying stock with continuous and periodic
dividends, bond prices, the concept of coupons and discounting,
futures on market indices and their use in hedging).
Basic facts about options(basic terminology, profit/loss graphs for
options, spreads, arbitrage opportunities arising from combinations
of options, inequalities for European calls and puts, put-call
parity for European options, pricing of American calls and puts.
Option pricing (option values on one step binomial trees,
risk-neutral approach to calculation of probabilities of
up-movements, two-step binomial trees for option pricing, pricing of
European and American options by working backwards, hedging for
option writers, delta hedging, calculation of the delta hedge on
trees, basic concepts of stochastic processes on binomial trees,
martingale representation theorem, idea of self-financing hedging
strategies, stock price process, geometric Brownian motion,
calculation of distribution of the stock price that follows a
geometric Brownian motion if the return and the volatility are
given, probability that a particular European option will be
exercised, Ito's formula, product rule for stochastic differentials,
stochastic differential equation for the geometric Brownian motion,
idea of application of change of measure and martingale
representation theorem to option pricing, Black-Scholes model,
pricing of European calls and puts, implied volatilities, finding
the replicating strategy, Greek letters of a portfolio, their
meaning, Delta-neutral and Gamma-neutral portfolios, pricing options
on foreign exchange and dividend-paying stocks, exotic options, in
particular, binary options).
Portfolios (mean-variance approach, attainable and efficient sets,
explicit calculations for two-asset portfolios, graphical meaning of
a capital market line, CAPM, beta's of a portfolio and its use for
hedging, hedging of portfolios using futures on market indices,
value-at-risk, the subadditivity property of risk measures).
Risk and insurance (the claim process and its expectation, the ruin
probability in non-life insurance, premiums and loaded premiums
lifetime distribution, life insurance, pure endowment and life
annuity). |
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