3904068: Derivatives, financial engineering and risk

Description

• Derivatives markets
• Major types of equity, interest rate, FX, and credit derivatives (forwards, futures, options, swaps, plain vanilla, exotic,…)
• Pricing models for derivatives (binomial model, Black-Scholes model, Black model, Libor Market model)
• Greek letters and hedging
• Financial Engineering
• Risk management with focus on derivatives
• Operational risk management

Learning Outcomes

• Know how derivatives and derivatives markets work
• Know the theoretical foundations of the standard pricing models for derivatives, and be able to apply them in practice
• Devise and/or analyze derivatives strategies for speculation, hedging and arbitrage
• Combine basic instruments to achieve desired payoff structures/decompose payoff structures into their basic components
• Knowledge of risk management essentials, standard risk measures, and their peculiarities with respect to portfolios containing derivatives
• Management tools to identify, evaluate, manage and monitor Operational Risks (loss data base, risk self assessments, scenario analysis, key risk indicators)
• Concepts for calculating Operational Risks

Lectures Method

Interactive lecture with exercises

Literature

Required reading:

• Hull: Options, Futures and Other Derivatives. Prentice Hall, 7th int. ed., 2010.
• Murphy: Understanding Risk. Chapman & Hall, 2008.
• Greg. N. Gregoriou (Hrsg.): Operational Risk Toward Basel III, 2009.
• Anna S. Chernobai, Svetlozar T. Rachev, Frank J. Fabozzi: Operational Risk – A Guide to Basel II Capital Requirements, Models, and Analysis, 2007.

Materials

Lecture slides and additional literature will be available on moodle