Valuation and Hedging of Financial Derivatives

Type of study	Follow-up Master
Language of instruction	Czech
Code	154-0340/03
Abbreviation	Hedging
Course title	Valuation and Hedging of Financial Derivatives
Credits	3
Coordinating department	Department of Finance
Course coordinator	prof. Ing. Tomáš Tichý, Ph.D.

Subject syllabus

1. Introduction (financial markets, financial derivatives, valuation approaches, models and software).
2. Nonlinear financial derivatives (forwads, futures, swaps).
3. Linear financial derivatives (vanilla options, exotic options, real options).
4. Stochastic processes (klassification, models, usage).
5. Black-Scholes-Merton (assumptions, derivatives, application).
6. Continuous models II (underlying, payoff, processes).
7. Numerical approximation (lattices, PDE, AI).
8. Simulation Monte Carlo (simulation, error, applications).
9. Interest rates and derivatives (classification, models, appication, credit risk).
10. Exotic derivatives (commodities, weather, energy).
11. Non-financial institutions (assumptions, risk, usage).
12. Financial institutions (assumptions, risk, usage).

Literature

HULL, J.C. Options, futures, and Other Derivatives. 11th ed. Harlow: Pearson, 2022.
HULL, J.C. Risk Management and Financial Institutions. 5th ed. New York: Wiley, 2018.
TICHÝ, T. Lévy Processes in Finance: Selected applications with theoretical background. SAEI, vol. 9. Ostrava: VŠB-TU Ostrava, 2011.

Advised literature

NEFTCI, S. Principles of Financial Engineering. 2nd ed. Academic Press, 2008.
SCHOUTENS, W. Lévy Processes in Finance: Pricing Financial Derivatives. Wiley, 2003.
SHREVE, S. E. Stochastic Calculus for Finance I: The Binomial Asset Pricing Models. Springer, 2004.
SHREVE, S. E. Stochastic Calculus for Finance II: Continuous-Time Models. Springer, 2004.

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