Stochastic Processes for Finance and Derivatives Markets

2018-2019

Course Objective

The purpose is to introduce fundamental concepts underlying arbitrage
theory and martingale approach with the emphasis on practical
applications in derivative pricing.

Course Content

This course is an introduction to stochastic processes and their
application in Finance. The purpose is to introduce fundamental concepts
underlying arbitrage theory and martingale approach with the emphasis on
practical applications in derivative pricing. It consists of two major
parts: Fundamentals (period 1) and Derivatives (period 2).

The second part introduces a broad range of derivatives and applies the
fundamental principles from the first period to price and hedge those
derivatives. The scope includes European and American options, Forward
contracts, Exotic options, zero coupon and swap pricing, and will be
extended to interest rate models to price interest rate derivatives.

Teaching Methods

Two lectures and one tutorial per week (tutorials alternate between
problem-solving and computer-based)

Method of Assessment

Homework, computer assignments and written exam

Entry Requirements

Stochastic Processes for Finance: Fundamentals

Literature

Hull "Futures, Options and Other Derivatives"
Bjork "Arbitrage Theory in Continuous Time"
lecture materials

Target Audience

MSc Honours program in Quantitative Risk Management
MSc Financial Econometrics

General Information

Course Code E_FIN_SPFDM
Credits 6 EC
Period P2
Course Level 400
Language of Tuition English
Faculty School of Business and Economics
Course Coordinator dr. S.A. Borovkova
Examiner dr. S.A. Borovkova
Teaching Staff dr. S.A. Borovkova

Practical Information

You need to register for this course yourself

Last-minute registration is available for this course.

Teaching Methods Lecture, Study Group
Target audiences

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