FinancialEngineering
PREREQUISITES: Finance mathematical statistics and probability
OBJECTIVES
This courses is appropriate for advanced undergraduate major courses in finance.It is suitable for students to acquire a working knowledge of how derivatives can be analyzed.The main content of the research for the pricing of financial derivatives market operation mechanism, application and derivative products. The important characteristics of the financial courses include the use of a large number of mathematics, and gives the numerical calculation of many examples.
PROGRESSIVE ASSESSMENT
Coursework assignment (30%)
2 hour examination (70%)
RECOMMENDED TEXTS
1.John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition.
2.Zheng Zhenlong: financial engineering, Second Edition.
TOPICS TO BE COVERED IN THE LECTURES/ CLASS SCHEDULE
Week 1: Introduction (introduction of derivative products, including futures, options, forwards and swaps )
Reference:John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.1-15
Week 2: The Operation Mechanism of the Futures Market (Introduction of the mechanism in Futures )
Reference :John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.16-34.
Week 3: The Use of Futures For Hedging ( the purpose and the risk management of hedging using futures )
Reference :John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.35-53.
Week 4: Interest Rate (the various yield calculation and economic meaning of yield)
Reference :John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.54-103.
Week 5: Determination of Forward And Futures Prices (the use of no risk arbitrage pricing method )
Reference :John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.54-71.
Week 6: Swaps (the use of swaps )
Reference :John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.105-113.
Week 7: Swaps ( the method of swaps pricing )
Reference :John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.113-126.
Week 8: The Mechanism of Options Market (the introduction of option type, trading the underlying assets )
Reference :John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.138-151.
Week 9: Properties of Option Prices(factors affecting option prices ,upper and lower bounders for option prices )
Reference :John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.152-157.
Week 10: Properties of Option Prices(put-call parity and early exercise )
Reference :John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.157-165.
Week 11: Strategies of Options Trading
Reference :John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.166-178.
Week 12: Binomial Trees
Reference :John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.178-193.
Week 13: Wiener Process and Ito Theorem (Changes in the process of stock price and option price).
Reference :John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.178-193.
Week 14: The Black-Scholes Model
Reference :John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.178-193.
Week 15: Greek Letters (The application of option hedging )
Week 15: Reference :John C.Hull, (2010), Options,Futures,and Other Derivatives ,8rd Edition,pp.269-289.
Week 16:Exercise Class
Week 17:Examination