Teaching Methodologies
Classes are based on a theoreticalpractical
approach, and the exposure of contents is accompanied by a wide
range of real cases, both national and foreign.
Three forms of assessment are available:
a) Students may carry out and discuss 4 evaluation works related to the topics under study, each for 5 marks;
b) Students may carry out and discuss 2 evaluation works related to the topics under study, each for 5 marks,
and be submitted to a final examination for 10 marks;
c) Students may be submitted to final examination for 20 marks, according to the rules defined in the
Assessment ISCAC.
In each case, students will be approved if they obtain an average of not less than10 marks
Learning Results
This course describes the main features of the derivatives market, with special emphasis on futures and
options market, and presents the main evaluation models of futures and financial options to European and
American. It is intended also to make a brief introduction to structured products and exotic options.
Completed the course the student will be able to:
Distinguish the features of various products;
Assess forward contracts and futures contracts;
Understand the fundamental properties of the price of the options;
Use hedging and speculation strategies with options;
Evaluate financial options of European and American type;
Evaluate structured products and exotic options
Program
1derivatives market: characteristics of futures, forwards, options and swaps
2The futures market: characteristics of a futures contract; forward contracts vs. futures contracts; hedging
strategies; evaluation of forw. and futures.
3Financial options market: markets and contracts; basic positions and payoffs; intrinsic value and time value.
4Price of the options properties: variables; arbitration restrictions; putcall parity.
5Strategies of hedging and speculation: algebra of the options; profiles of results.
6financial options: binomial model; stochastic calculus applied to finance (random walk, Brownian motion,
motto of Itô calculus); BlackScholes modelMerton;
options on indices, currencies and Futures; greeks and dynamic hedging.
7Alternatives to the BlackScholes modelMerton
8American options: Black, quadratic approximation approach; other evaluation models; numerical methods.
9Options and financial innovation: structured products and exotic options.
Internship(s)
NAO
Bibliography
Hull, J. C. (2008), Options, Futures and Other Derivatives, 7th edition, PrenticeHall.
• Bjork, T. (2004), Arbitrage Theory in Continuous Time, 2nd edition, Oxford University Press.
• Shreve, S. E. (2004), Stochastic Calculus for Finance II: ContinuousTime
Models, Springer.