Dr Rohit Rahi

This course is available on the MSc in Accounting and Finance, MSc in Applicable Mathematics, MSc in Financial Mathematics, MSc in Risk and Stochastics, MSc in Statistics (Financial Statistics) and MSc in Statistics (Financial Statistics) (Research). This course is available with permission as an outside option to students on other programmes where regulations permit.

This is an advanced course. Students will be expected to show some familiarity with statistics, calculus and random processes.

The course provides a thorough grounding in the theory of derivatives pricing and hedging. Particular emphasis is placed on pricing within a multi-period, mostly continuous-time, framework. A special feature of the course is its coverage of the modern theory of no-arbitrage pricing using PDE and martingale methods. These methods are applied to the pricing of vanilla and exotic options, forwards, futures and interest rate derivatives. The uses of derivatives in hedging and risk-management are discussed as well.

20 hours of lectures and 10 hours of seminars in the LT.

Weekly problem sets in classes (10).

Teaching notes will be distributed. No one book covers the entire course, but the following is an excellent reference: John C Hull, Options, Futures and Other Derivatives.

Exam (100%, duration: 2 hours) in the main exam period.

Students answer three out of four questions.