Overview
This course intended to provide students with the theoretical foundation and basic techniques in the rapidly growing area of financial engineering. Students gain a thorough understanding of options, futures, and other financial instruments. Skills are developed in basic pricing analysis, use of pricing models, and trading and hedging strategies. The primary method for teaching these points follows a two step approach. First, the student will be introduced to standard techniques for pricing, hedging, and other analysis. Next, these techniques will be applied through a variety of real world strategies. The end goal is to develop skills which the students can apply in derivative markets.
Syllabus
l An Overview of Financial Engineering
l Mechanics of Futures and Forward Markets, Determination of Forward and Futures Prices
l Hedging Strategies Using Futures, Interest Rate Markets
l Interest Rate Markets, Swaps
l Swaps, Mechanics of Options Markets
l Mechanics of Options Markets, Properties of Stock Option Prices
l Properties of Stock Option Prices,
l Trading Strategies Involving Options
l Introduction to Binomial Trees
l MM Theory and No Arbitrage
l A Framework for Fixed-Income Engineering
Derivatives Mishaps and What We Can Learn from Them