Derivatives markets are an important and growing segment of financial markets and play an important role in the management of risk.
This invaluable set of lecture notes is meant to be used in conjunction with a standard textbook on derivatives in an advanced undergraduate or MBA elective course on futures, forwards, swaps, options, corporate securities, and credit default swaps. It covers the foundations of derivatives pricing in arbitrage-free markets, develops the methodology of risk-neutral valuation, and discusses hedging and the management of risk.
Sample Chapter(s)
Chapter 1: Introduction to Forward and Futures Contracts (161 KB)
Contents:
- Introduction to Forward and Futures Contracts
- Pricing Forwards and Futures
- Interest Rate and Currency Swaps
- Introduction to Options and No-Arbitrage Restrictions
- Trading Strategies and Slope and Convexity Restrictions
- Optimal Early Exercise of American Options
- Binomial Option Pricing
- Using the Binomial Model
- The Black–Scholes–Merton Option Pricing Formula
- Options on Futures
- Risk Management
- Empirical Evidence and Fixes
- Corporate Securities and Credit Risk
Readership: Advanced undergraduates and postgraduate students of finance along with MBA students taking an elective on derivatives and risk management in finance.
