2 or 3 credits
Spring 2025 Lecture
The objective of this course is to provide students with the necessary skills to value and hedge a wide variety of derivatives contracts used in financial markets. The main tool of analysis of the course is stochastic calculus set in continuous-time. Some basic knowledge of stochastic processes would be helpful, but not essential: we will cover what we need in class. The course covers valuation of securities using modern martingale methods as well as the necessary parameter estimation and numerical methods such as Monte Carlo simulations. Applications will include derivatives such as options on stocks, bonds and currencies, as well as valuation of defaultable securities, and modeling the term structure of interest rates and risk management with Value-at-Risk. Prerequisites: MGMT 61400, or similar coursework with instructor permission.
Learning Outcomes1Value and hedge commonly traded financial derivatives.
2Understand the underlying economic determination and behavior of financial derivatives.
3Design and structure such financial derivatives.
Restrictions
Attachments
made by Purdue students.