Module description
Syllabus
This course is an introduction to derivatives pricing and hedging. The following topics will be covered:
Arbitrage-free pricing and risk-neutral valuation, expectations, forward prices, derivatives pricing and hedging in discrete time, binomial trees, geometric Brownian motion, martingales, hitting times and reflection principle, elements of stochastic integration and Ito calculus, derivatives pricing and hedging in continuous time, change of numeraire, Black-Scholes model: PDE and martingale approaches, Feyman-Kac theorem, option sensitivities, barrier options.
Assessment details
Assessment
2 hr written examination or alternative assessment
Teaching pattern
Two hours of lectures per week
Suggested reading list
Suggested reading/resources (link to My Reading Lists)