This course covers forward, futures, swap, and option contracts. It deals with how the contracts work, how they are used, how they are valued, and how financial institutions hedge their positions in the contracts. The topics covered include Black-Scholes pricing, the use of binomial trees, and delta-gamma-vega hedging, the mathematics underlying the pricing of derivatives and the numerical procedures that are used to implement derivatives pricing models. It includes in-depth material on exotic options, interest rate derivatives, and credit derivatives. Other topics on risk management will be briefly discussed.
ECON 873