Advanced Derivatives Course

Spring 2004

Professor Philippe Jorion


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.
  1. Thursday April 29
    Numerical Techniques
    Readings: Hull, Ch 18, 22

  2. Thursday May 6
    Exotic Options
    Readings: Hull, Ch 19

  3. Thursday May 13
    Real Options
    Readings: Hull, Ch 28

  4. Friday May 21 - MPAA 120A
    Portfolio Management
    Portfolio Management

  5. Thursday May 27
    Interest Rate Options: Standard Models
    Readings: Hull, Ch 22, 23
    Option Pricing Notes
    Exercise Due: Portfolio Construction

  6. 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 written permission of the lecturer is prohibited.