"Financial Economics"

Course Objectives

This course covers forwards, futures, swaps, and options. By the end of the course, students will have good knowledge of how these products work, how they are used, how they are priced, and how financial institutions hedge their risks when they trade the products.

Main Texts

Hull, J. C. (2006). Options, futures, and other derivatives. Pearson Education India.

Hull, J. C. (2001). Fundamentals of Futures and Options Markets. Upper Saddle River, NJ.. Prentice Hall

Course Outline

Introduction

  • Introduction and mechanics of futures markets
  • Hedging strategies using futures
  • Interest rates
  • Determination of forward and futures prices

Swaps

Option markets

  • Mechanics of option markets and properties of options
  • Trading strategies involving options
  • Binomial trees
  • Types of options

Extra topics

  • The Greeks
  • Volatility smiles