Dr Rohit Rahi

This course is available on the Global MSc in Management, MSc in Accounting and Finance, MSc in Applicable Mathematics, MSc in Econometrics and Mathematical Economics, MSc in Financial Mathematics, MSc in Quantitative Methods for Risk Management, MSc in Risk and Finance, 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.

Global MSc in Management ('Accounting and Finance' and 'Finance' concentrations only).

This course is not capped; any eligible student that requests a place will be given one.

This is an advanced course. Students will be expected to have a good grasp of probability theory and multivariate calculus. Prior knowledge of stochastic calculus is not required; the necessary tools will be introduced as part of the course.

The course provides a thorough grounding in the theory of derivatives pricing and hedging. Both discrete-time and continuous-time models will be covered, including a comprehensive treatment of the Black-Scholes model. A special feature of the course is its emphasis on the modern theory of no-arbitrage pricing using martingale methods. These methods will be applied to the pricing of equity and currency options, forwards and futures, and interest rate derivatives. The uses of derivatives in hedging and risk management will be discussed as well.

30 hours of lectures in the WT.

This course is taught in the interactive lecturing format. There is no distinction between lectures and classes/seminars; there are “sessions” only, and the pedagogical approach in each session is interactive.

Exercises will be discussed in class each week. Students will be expected to make positive contributions to class discussion.

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, reading time: 15 minutes) in the spring exam period.