Financial Derivatives

After a brief introduction to derivatives, the first section of this course will examine a broad range of derivative products and markets, and discusses how risks are managed by the financial institutions and the fundamental principle underlying this material – pricing by no arbitrage. The second section of the course will explore forward and futures contracts including pricing and applications such as hedging with forwards and futures. The third section of this course will study swap markets and their risk applications. Section 4 presents derivative securities with option-like payoffs with an emphasis on no arbitrage pricing restrictions, and describes how they are used to hedge different kinds of risk. Section 5 analyses option pricing in a mathematical approach, and presents well known models in pricing options such as the binomial option pricing model, the Black-Scholes model. This section discuses hedging with options, and applications of option pricing. Section 6 will discuss options strategies used to manage corporate risk.  The final section of the course will present some issues of current concern like the use of derivatives in hedging risk during the global financial crisis.
This course builds on the material covered in: Hull 2009, Option, Futures, and Other Derivatives; the CFA program curriculum 2009; and on core papers published in top -ranked journals, as well.