MFIN5711 Options and the Future Markets
This course provides a thorough analysis of the key features of derivative securities along with strategies for managing risk with these instruments. Students will gain an in-depth understanding of derivatives, financial engineering and risk management. The course introduces students to derivatives based on equities, fixed income and commodity instruments. Option pricing methodology is presented from the perspective of speculators/investors with the emphasis on understanding the concept of risk neutral valuation as exemplified with binomial model. The course covers the costs and benefits of risk management and their uses and applications. Concepts of VaR, scenario analysis and crash testing are explained. Alternatives to VaR, such as Expected Shortfall, are examined. Techniques such as stress testing, scenario analysis and back testing results of the Value at Risk methodology are introduced.