Derivatives Valuation (ECFS881)

This unit deals with important quantitative issues for derivatives market practitioners. The aim is to extend the student's understanding of derivatives valuation. This unit looks at key numerical techniques and applies them to value exotic, GARCH and interest rate options in cases where classical Black-Scholes assumptions are inappropriate. Teaching uses both lectures and hands-on sessions with computer software.

Learning Outcomes:

  1. Understand how to appropriately adjust and apply discounted expected cash flow valuation to a derivative context.
  2. Understand key analytical and numerical techniques for derivatives valuation including their appropriate applications and limitations.
  3. Implement and apply appropriate techniques to value exotic, GARCH, bond and interest rate options in cases where classical Black-Scholes assumptions are inappropriate.
  4. Critically evaluate the biases in Black-Scholes and know when its use is inappropriate.
  5. Apply appropriate options and hedging valuation techniques to various situations.
  6. Develop skills in communicating complex technical concepts.

Topics:

  1. Numerical Techniques in Option Pricing
  2. Pricing and Hedging Exotic Options
  3. GARCH Options - Explaining the Biases in Black Scholes
  4. Interest Rate Options

Prerequisite Units:

Lecturers:

Unit Guides:

  • Derivatives Valuation - The link will provide a list of guides for this unit. If the desired term/location is not listed, please view the latest one available.

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