|This course covers the analytical and numerical methodologies applied by hedge funds and derivatives trading desks to price complex derivative securities and design arbitrage strategies. We will apply these methodologies to several case studies, whose topics range from relative value trades in equity options and fixed income instruments, to the pricing of convertible securities. The course covers advanced models of option pricing and credit risk, including models with stochastic volatility, jumps, stochastic intensity of default, and credit risk. We also cover the numerical methods routinely used in the industry to price derivative securities. Finally, we spend a few classes on the topic of credit risk, focusing also on the important topic of sovereign credit risk.
In a world of increasingly higher sophistication, the valuation of complex derivative securities and the design of arbitrage strategies require the understanding and application of advanced models of option pricing, and their application to real data. This course emphasizes both, and provides students with real world problems to solve.
More information is available on the course homepage http://faculty.chicagobooth.edu/pietro.veronesi/teaching/BUS439.htm.