The subject provides a thorough understanding of derivative securities (futures and options) and markets. The application of derivatives in the context of trading and hedging is discussed. In addition, the mathematical principles (stochastic calculus) of derivative pricing are introduced.
|Bond Business School|
- January 2018 [Standard Offering]
- September 2018 [Standard Offering]
|Available to Study Abroad students|
- Commencing in 2017: $4,205
- Commencing in 2018: $4,247
1. Knowledge of the contractual features and properties of various derivatives, including options, futures and forwards
2. Determine the value of options, futures and forwards and calculate the payoffs and profits of strategies involving these products
3. Knowledge of the properties of the Wiener process and a recognition of its importance in finance
4. Ability to model standard prices processes using Ito's lemma, to state the SDEs of geometric Brownian motion and the Ornstein-Uhlenbeck process and to find their solutions.
5. Derive and apply the Black-Scholes-Merton formula
6. Understanding of the equivalent martingale measure (EMM), state pricing, and how they relate to the PDE approach to derivatives valuation.
7. Understanding of the principles of modelling the term-structure of interest rates and the ability to apply simple models
8. Demonstrate a general understanding of credit risk and credit risk models
Students must have successfully completed FINC13-303 Portfolio Analysis and Investment Markets and FINC12-200 Fundamentals of Finance or equivalent prior to undertaking FINC13-305