![]() ![]() In addition, we recommend an intermediate course on mathematical statistics or engineering statistics as an optional prerequisite for this class. ![]() Students should also have taken the course “Financial Securities and Markets” previously. It is important that students taking this course have good working knowledge of calculus-based probability and stochastic calculus. As an important example of incomplete markets, we discuss bond markets, interest rates and basic term-structure models such as Vasicek and Hull-White. Using tools and techniques from stochastic calculus, we cover (1) Black-Scholes-Merton option pricing (2) the martingale approach to arbitrage pricing (3) incomplete markets and (4) the general option pricing formula using the change of numeraire technique. Prerequisites: Calculus-based probability, Stochastic Calculus, and a one semester course on derivative pricing (such as what is covered in Financial Securities and Markets).ĭescription: This is an advanced course on asset pricing and trading of derivative securities. It is important that students taking this course have good working knowledge of multivariate calculus, linear algebra and calculus-based probability. As part of the course, we review current risk models and practices used by large financial institutions. VaR and Expected Shortfall) and portfolios (e.g. ![]() We will cover the construction of risk measures (e.g. This course is an introduction to portfolio and risk management techniques for portfolios of (i) equities, delta-1 securities, and futures and (ii) basic fixed income securities.Ī systematic approach to the subject is adopted, based on selection of risk factors, econometric analysis, extreme-value theory for tail estimation, correlation analysis, and copulas to estimate joint factor distributions. Prerequisites: Multivariate calculus, linear algebra, and calculus-based probability.ĭescription: Risk management is arguably one of the most important tools for managing investment portfolios and trading books and quantifying the effects of leverage and diversification (or lack thereof). ![]()
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