1️⃣CFRM 504: Options & Other Derivatives

Probably the purest math course from the curriculum. Derivatives pricing involves rigorous derivations (yeah, I know) and it's interesting to see how financial market assumptions become implemented.

Reading Material:

• Options, Futures, and Other Derivatives, J. Hull, 2021.

• Course notes are available here. M. Lorig.

This course introduces students to basic financial derivatives, explores how to price them, and how to use them to manage financial risk. Specific topics covered in the course include arbitrage, the 1st and 2nd fundamental theorems of asset pricing, the binomial, trinomial and Black-Scholes models, stochastic volatility, local volatility, European and American options, variance swaps and barrier claims.

1. Introduction to Financial Derivatives

2. The Binomial Model

3. 1st and 2nd Fundamental Theorems of Asset Pricing

4. Brownian Motion, Ito Processes, and Stochastic Differential Equations

5. The Black-Scholes Model

6. The Greeks

7. Dupire’s Local Volatility, Stochastic Volatility Models

8. Exotic Options