|I develop, critically assess, and apply theories of pricing derivatives. Topics: introduction to forward contracts, futures, and swaps; pricing forwards and futures; interest rate and currency swaps; introduction to options and no-arbitrage restrictions; trading strategies and slope and convexity restrictions; optimal early exercise of American options; binomial option pricing; using the binomial model; the Black-Scholes-Merton option pricing formula; extensions of the BSM model; risk management with options; empirical evidence and time-varying volatility; corporate securities (common stock, senior and junior bonds, callable bonds, warrants, and convertible bonds) and credit risk.
I emphasize the application of the theory to the management of risk and provide the foundations for the courses Business 35101, 35130, 35131, 35132 and 35152. The course is mathematical, requiring some prior exposure to calculus, statistics, and probability theory. By browsing through the course description posted on the portal, you should be able to gauge your proficiency in these skills. The course is demanding in effort and time and is appropriate for students who have the time and the needed background and motivation. I make every effort to bring out the intuition behind the results.