Course 2015-2016 a.y.

20245 - ADVANCED DERIVATIVES


CLMG - M - IM - MM - AFC - CLAPI - CLEFIN-FINANCE - CLELI - ACME - DES-ESS - EMIT
Department of Finance

Course taught in English


Go to class group/s: 31

CLMG (6 credits - I sem. - OP  |  SECS-S/06) - M (6 credits - I sem. - OP  |  SECS-S/06) - IM (6 credits - I sem. - OP  |  SECS-S/06) - MM (6 credits - I sem. - OP  |  SECS-S/06) - AFC (6 credits - I sem. - OP  |  SECS-S/06) - CLAPI (6 credits - I sem. - OP  |  SECS-S/06) - CLEFIN-FINANCE (6 credits - I sem. - OP  |  SECS-S/06) - CLELI (6 credits - I sem. - OP  |  SECS-S/06) - ACME (6 credits - I sem. - OP  |  SECS-S/06) - DES-ESS (6 credits - I sem. - OP  |  SECS-S/06) - EMIT (6 credits - I sem. - OP  |  SECS-S/06)
Course Director:
CLAUDIO TEBALDI

Classes: 31 (I sem.)
Instructors:
Class 31: 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 will be exemplified in a number of practical applications. In particular specific computer room sessions are 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 historical 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.
  • Trading volatility and correlations.
  • Joint Credit+ Equity Derivatives Valuation.

Detailed Description of Assessment Methods
Student evaluation consists of a final written exam and an optional assignment. The empirical assignment may be produced either by individuals or by groups of students composed by up to four people.
Upon specific agreement with the students, the written exam can be substituted by two midterm computer room sessions.

Textbooks
  • C. BENNETT, Trading Volatility, Correlation, Term Structure and Skew.
  • The course material includes academic notes, papers, slides and other notes that are available on the weblearning space.

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 Excel and MATLAB numerical software packages is required.

Last change 05/05/2015 17:13