Derivatives
Full Time// 2nd Semester, Course Code: ΜΕΧΡΗ331
Part Time // 3rd Semester, Course Code: ΜΕΧΡΗ-Μ331
Credits: 6
Learning Outcomes
The course focuses on the operating mechanisms of the financial derivatives markets which are currently an active part of the international financial markets. The purpose of the course is to present the use of derivative products, such as Futures and Options, as well as their valuation techniques in a number of mathematical models. Also, speculative strategies, hedging strategies, and investment risk quantification measures related to the necessity of financial derivatives are going to be presented.
After the successful completion of the course, students will be able to
- know the main features of basic financial derivative securities, such as Futures/Forwards and Options.
- use basic financial derivative products to design speculative strategies, arbitrage strategies, and hedging strategies.
- value basic financial derivative securities with the discrete-time Binomial Model.
- value underlying financial derivative securities with the continuous-time Black-Scholes Model of Brownian Geometric Motion and
- interpret the main risk components, such as sensitivity coefficients, of basic financial derivative products and use them for risk management of dynamic portfolios.
General Competences
- Development of free, creative and inductive thinking,
- Decision making,
- Individual/independent work,
- work in an interdisciplinary environment
Course Content
Futures and Futures Contracts: Terminology – Payoffs – Standardization – Margin Operations – Valuation – Speculation – Risk Hedging – Options Markets: Call and Put – Basic Positions – Payoffs and P/L Charts – Standardization – Trading – Spreads – Options –– Properties of Stock Options: Basic Assumptions – Factors Affecting the Value of Options – Speculation – Put-Call Parity – Early Exercise of American Options – The Effect of Dividends – Options and Speculative Strategies– Interpretation of the Put Call Parity – Binomial Model: One-Step Binomial Trees – Two-Step Binomial Trees – Valuation with Risk-Free Portfolios – Risk Neutral Valuation – Valuation of European Options – Valuation of American Options – Hedging Delta Risk – Stochastic Processes and Itô’s Lemma: Types of Stochastic Processes – Markovian Property – Weak Market Efficiency – Continuous-Time Stochastic Processes – Wiener Processes – Generalized Wiener Processes – Processes Itô – The Stock Price Process and Parameter Interpretation – Itô’s Lemma and Applications – Black, Scholes & Merton’s MDE – Risk Neutral Valuation – Black & Scholes Valuation Formulas – Implied Volatility
Student Performance Evaluation
Written Final Exam (80%) and individual homeworks (20%).
Bibliography
Suggested Bibliography
- John C. Hull, Options, Futures, And Other Derivatives, 10th Edition, Pearson, 2018.
Related Academic Journals
Master of Science (M.Sc.) in
«Banking and Finance»
Specialization in
«Banking and Financial Management»