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.
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).
The required text is:
Options, Futures, and Other Derivatives, 5th edition,
Prentice Hall, 2002,
© 2004 - Philippe Jorion.
Please note that the lecture materials are protected by copyright.
Duplicating course material for any commercial purposes without written permission of the lecturer is prohibited.