| Course Unit Code | 154-0340/03 |
|---|
| Number of ECTS Credits Allocated | 3 ECTS credits |
|---|
| Type of Course Unit * | Choice-compulsory type B |
|---|
| Level of Course Unit * | Second Cycle |
|---|
| Year of Study * | Second Year |
|---|
| Semester when the Course Unit is delivered | Winter Semester |
|---|
| Mode of Delivery | Face-to-face |
|---|
| Language of Instruction | Czech |
|---|
| Prerequisites and Co-Requisites | Course succeeds to compulsory courses of previous semester |
|---|
| Name of Lecturer(s) | Personal ID | Name |
|---|
| TIC02 | prof. Ing. Tomáš Tichý, Ph.D. |
| Summary |
|---|
Within this course, particular problems of financial derivatives, their
pricing, hedging, replication and modelling in general are treated. At first,
particular sorts of derivatives, methods of pricing and most common types of
underlying assets and related processes are introduced. Subsequently, these
methods and types of underlying assets are applied in order to model the price
of basic types of financial derivatives. Single topics are constituted by non-
standard derivatives.The task is to allow the students to use obtained
knowledge in solving of real problems. |
| Learning Outcomes of the Course Unit |
|---|
This course aims at pricing, hedging and modeling of financial derivatives as well as primary financial securities. The aim of the course is
- to improve the knowledge and skills of students
- so that they will be able to apply acquired knowledge
- in order to efficiently utilize financial derivatives within risk management issues of both, financial and nonfinancial institutions;
- the students should be able to formulate pricing and hedging task and subsequently propose an efficient approach to solve it. |
| Course Contents |
|---|
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). |
| Recommended or Required Reading |
|---|
| Required Reading: |
|---|
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.
|
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. Finanční deriváty – typologie finančních derivátů, podkladové procesy, oceňovací modely. Ostrava: VŠB-TU Ostrava, 2006.
|
| Recommended Reading: |
|---|
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. |
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. |
| Planned learning activities and teaching methods |
|---|
| Lectures |
| Assesment methods and criteria |
|---|
| Task Title | Task Type | Maximum Number of Points
(Act. for Subtasks) | Minimum Number of Points for Task Passing |
|---|
| Examination | Examination | 100 | 51 |