# Advanced Derivatives Course

## Spring 2004

## Professor Philippe Jorion

### GRADUATE SCHOOL OF MANAGEMENT

UNIVERSITY OF CALIFORNIA

IRVINE, CALIFORNIA 92697-3125

## Course Description:

This course covers a list of advanced topics in derivative securities.
It assumes that students have taken an introductory course in derivatives as well as an
introduction to fixed-income markets.
The course is organized as a series of lectures, half covered
by Professor Yu, the other half by Professor Jorion.

The first part of the course develops numerical techniques which
are used to implement pricing methodologies.
The techniques are applied to exotic options and real options.

The second part of the course develops term structure models and
options based on fixed income securities.
We will first look at standard models that assume lognroamlity such as
the Black model.
We will then examine model based on the short term interest rate
as well as more complex models such as the Heath, Jarrow, and Morton
model, which is based on the forward rate.
We will also cover a practical implementation of portfolio management.

**Course Prerequisites:**

This coure should not be taken without a good understanding of
derivatives and, preferably, fixed-income markets.
Hence, prerequisites are
GSM 249 "Derivatives" (required) and
GSM 243 "Fixed-Income Markets" (preferred).

**Course Materials:**

The required text is:

John Hull,
* Options, Futures, and Other Derivatives, 5th edition, *
Prentice Hall, 2002,

## Advanced Derivatives: Schedule for Spring 2004

Note: this schedule may be subject to additional changes.

Location: GSM 223 (Thursdays).

Time: mornings, 9am-12pm.
__Thursday April 29 __

**Numerical Techniques **

*Readings: Hull, Ch 18, 22 *

__Thursday May 6 __

**Exotic Options **

*Readings: Hull, Ch 19 *

__Thursday May 13 __

**Real Options **

*Readings: Hull, Ch 28 *

__Friday May 21 - MPAA 120A __

**Portfolio Management **

*Readings: *

Portfolio Management

__Thursday May 27 __

**Interest Rate Options: Standard Models **

*Readings: Hull, Ch 22, 23 *

Option Pricing Notes

*Exercise Due: *
Portfolio Construction

__Thursday June 3 __

**Term Structure Models **

*Readings: Hull, Ch 23, 24 *

Term Structure Models Notes

Corporate Securities

*Exercise Due: *
BDT.XLS
HOLEE.XLS

Philippe Jorion's home page
© 2004 - Philippe Jorion.

Please note that the lecture materials are protected by copyright.

Duplicating course material for any commercial purposes without
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