OVERVIEW

This teaching aims to provide quantitative and interpretative tools for the main financial derivatives and their application.

AIMS AND CONTENT

LEARNING OUTCOMES

Learning outcomes:

At the end of the teaching unit, the student will be able to:

- describe the definition and structure of the main derivative instruments, with reference to

forward, futures, and option contracts;

- apply valuation principles and the main mathematical models to derivative pricing in standard contexts addressed during the course;

- use the binomial model for option pricing in exercises and assigned problems;

- explain the Black-Scholes-Merton model and its field of application within the analytical framework developed during the course;

- employ derivative instruments for risk hedging, arbitrage, and speculation in simple case studies.

AIMS AND LEARNING OUTCOMES

Learning outcomes:

This course is an introduction to derivatives. Definition and structure of different kinds of derivatives are treated, including futures, forward, and options contracts. Valuation principles and mathematical models are analyzed and applied, including the Binomial and the Black-Scholes-Merton model. Finally, efficient use of derivatives instruments will be considered for purposes such as risk control, arbitrage and speculation.

At the end of the course, the student will be able to deal, autonomously and properly, with the learned topics and apply them.

PREREQUISITES

Students are expected to know basic elements of financial mathematics, as they are taught in a course of Financial Mathematics at the laurea/bachelor degree.

Students are expected to know basic elements of calculus, as they are taught in a course of Mathematics at the laurea/bachelor degree (derivatives and integrals; linear algebra), and to be familiar with several variable functions (partial derivatives).

Students are expeted to know basic elements of probability, as they are thaught in a course at the laurea/bachelor degree (discrete and absolutely continuous random variables, expected value, variance).

TEACHING METHODS

75% of the course is taught via recorded lectures, while the remaining 25% is taight in presence. Also, there will be 12 hours of e-tivities, with laboratories on practical applications of the main contents.

Students who have valid certification of physical or learning disabilities  and who wish to discuss possible accommodations or other circumstances regarding lectures, coursework and exams, should speak both with the instructor and with Professor Elena Lagomarsino inclusione.economia@unige.it, the Department's disability liaison.

SYLLABUS/CONTENT

- portfolios and no-arbitrage principle;
- definition and main features of financial derivatives;
- forward contracts and futures contracts: structure and valuation;
- option contracts: structure, pricing bounds, put-call parity;
- binomial model and application to option pricing.

RECOMMENDED READING/BIBLIOGRAPHY

Main reference:
 J. C. Hull, Options, futures, and other derivatives, 11th edition, Pearson, 2022.

Further readings:
P. Wilmott, P. Howison and J. Dewynne, The Mathematics of Financial Derivatives: a Student Introduction, Cambridge University Press, 1995.
T. Bjork, Arbitrage theory in continuous time, 4th edition, Oxford University Press, 2019.

LESSONS

LESSONS START

FIRST SEMESTER 26-27

Class schedule

The timetable for this course is available here: Portale EasyAcademy

EXAMS

EXAM DESCRIPTION

The exam will be written and will contain questions on the theoretical and modeling features treated in the course as well as exercises.

ASSESSMENT METHODS

There will be the Open Badge exam to asses the contents of each module.

FURTHER INFORMATION

Other information will be provided during the course. For non-attending students the same rules apply.

Students with DSA certification ("specific learning disabilities"), disability or other special educational needs are advised to contact the teacher at the beginning of the course to agree on teaching and examination methods that, in compliance with the teaching objectives, take account of individual learning arrangements and provide appropriate compensatory tools.