The course defines the main kind of derivatives, shows how they are used to achieve various hedging and speculating objectives, introduces a framework for pricing derivatives, and studies several applications of derivative-pricing techniques outside derivative markets.

• Introduction
  • What are derivatives?
  • The main types of derivatives
  • Derivatives markets
  • Reasons for trading derivatives
  • Derivative pricing
• Forwards and Futures
  • The market for forward and futures
  • Marking to market and margins
  • Valuing forward contracts and the forward price
• Swaps
  • The market for swaps
  • Valuation of swaps contracts
• Options
  • The market for options
  • Option payoffs
  • Factors affecting option prices
  • No-arbitrage restrictions; the put-call parity
• Binomial Trees
  • The binomial model
  • Valuation of European options
  • Valuation of American options
  • Valuation of general derivatives
  • Dividends and other generalizations
• The Black-Scholes Formula
  • The Black-Scholes model
  • Derivations of the Black-Scholes formula
  • Volatility estimation and implied volatility
  • Empirical evidence: volatility smirk and smile
• Beyond Black-Scholes
  • The holes in Black-Scholes
  • Non-constant volatility models
  • Stochastic jumps
• Hedging and the “Greeks”
  • The basic principle: delta-hedging
  • Delta-hedging with forwards
  • Delta-hedging with futures: tailing the hedge
  • Delta-Gamma hedging using options

• Have a good understanding of the Foreign Exchange and Interest Rate markets, including Derivative instruments.
• Acquire a clear understanding of Financial Derivatives through focusing on the essential Management Concepts that form the building blocks of these instruments
• Master the dynamics of Financial Derivatives as part of an extended toolbox of Financial Risk Management, which will in turn increase optimality in hedging strategies