Course 2010-2011 a.y.

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CLMG (6 credits - I sem. - OP  |  SECS-P/11) - M (6 credits - I sem. - OP  |  SECS-P/11) - IM (6 credits - I sem. - OP  |  SECS-P/11) - MM (6 credits - I sem. - OP  |  SECS-P/11) - AFC (6 credits - I sem. - OP  |  SECS-P/11) - CLAPI (6 credits - I sem. - OP  |  SECS-P/11) - CLEFIN-FINANCE (6 credits - I sem. - OP  |  SECS-P/11) - CLELI (6 credits - I sem. - OP  |  SECS-P/11) - ACME (6 credits - I sem. - OP  |  SECS-P/11) - DES-ESS (6 credits - I sem. - OP  |  SECS-P/11) - EMIT (6 credits - I sem. - OP  |  SECS-P/11)

Course Director:
CLAUDIO TEBALDI

Course Objectives

The course is aimed at gaining a more advanced knowledge of financial equity derivatives. The course content is divided in three modules. In the first module the notion of stochastic volatility is introduced; its importance for dynamic trading of market risks is exemplified in a number of practical applications. In particular specific computer room sessions sre devoted to the procedures of volatility indexing and volatility filtering from hystorical stock and option prices. The second module is devoted to the analysis of the basic stochastic calculus methods which are necessary to value derivatives using the most popular stochastic volatility market models. The third part of the course illustrates the broad spectrum of applications which financial derivatives have in investment banking and in the asset management industry. These specific applications are taught by leading practitioneers and supported by practical computer room sessions.

Course Content Summary

• The limits of the Black-Scholes model: stochastic volatility models.
• Filtering volatility from hystorical time series.
• Market expectations, implied volatility and the volatility index.
• Pricing in stochastic volatility models: a stochastic calculus approach.
• Static and dynamic hedging of financial derivatives.
• Dynamic asset allocation: asset management using financial derivatives.
• Trading volatility and correlations.

Detailed Description of Assessment Methods

Student evaluation consists of an empirical assignments and a final written exam. The empirical assignment accounts for 40% of the final mark, while the final written exam accounts for 60% of the final mark.

The empirical assignment may be produced either by individuals or by groups of students composed by up to four people.

Textbooks

• The course material includes academic notes, papers, slides and other notes that are available on the weblearning space.

Exam textbooks & Online Articles (check availability at the Library)

Prerequisites

Students are expected to have some basic knowledge of stochastic calculus and to have attended a basic course of financial derivatives. An elementary knowledge of the MATLAB numerical software package

Last change 13/05/2010 16:31