Not available in 2015/16
FM438 Half Unit
Advanced Asset Pricing
This information is for the 2015/16 session.
Dr Jean-Pierre Zigrand OLD 4.22
This course is available on the MSc in Finance and Economics and MSc in Finance and Economics (Research). This course is not available as an outside option.
Students must have completed Financial Economics (FM436).
Advanced Asset Markets is the continuation of the asset pricing component of FM436, Financial Economics. It allows students to further explore pricing in continuous time by applying the pricing and hedging methods of FM436 to more advanced products and to more complex environments. This course is ideal for the students who would like to apply the tools of continuous time finance learned in FM436 to the pricing and hedging of advanced real-life derivatives and structured products both in complete and in incomplete markets. The following topics will be covered: i. No-Arbitrage Pricing in complete and incomplete markets; ii. Local volatility modelling, including an excursion into local time; iii. Exotic derivatives and Structured Products; iv.Single- and multi-factor term structure modelling; v. Equilibrium pricing in complete and incomplete markets; and vi. Endogenous risk modelling with applications to trading and derivatives pricing.
20 hours of lectures, 10 hours of classes and 6 hours of workshops in the LT.
A complete set of lecture notes will be distributed at the start of term. There is no textbook covering the entire material, though Bjork, (“Arbitrage Theory in Continuous Time" (Third Edition, 2009)) is a good read and a couple of chapters in Gatheral (“Modelling the Volatility Surface: A Practitioner's Perspective" (2007)) are optional andcover some of the the volatility modelling component of the course.
Exam (100%, duration: 2 hours) in the main exam period.
Total students 2014/15: 9
Average class size 2014/15: 11
Controlled access 2014/15: Yes
Value: Half Unit