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Derivatives

  • Enseignant(s):  
  • Titre en français: Actifs Dérivés
  • Cours donné en: anglais
  • Crédits ECTS:
  • Horaire: Semestre de printemps 2019-2020, 4.0h. de cours + 1.0h. d'exercices (moyenne hebdomadaire)
  •  séances
  • site web du cours site web du cours
  • Formations concernées:
    Maîtrise universitaire ès Sciences en finance, Orientation gestion des actifs et des risques

    Maîtrise universitaire ès Sciences en finance, Orientation finance d'entreprise

    Maîtrise universitaire ès Sciences en finance : Entrepreneuriat financier et science des données

 

Objectifs

The course aims to introduce Finance students to the theoretical and practical aspects of financial futures, options, and other derivatives. Financial derivatives are one of the most important tools of modern finance and have been trading at enormous volumes (~ 700 USD trillion) in the derivatives markets over the last 40 years. Individuals and institutions participate in these markets to meet a variety of objectives. For example, firms and portfolio managers can use derivatives to hedge particular types of risks, or to change the distribution of the returns on their portfolios for speculative purposes.

During the course we focus on the analytical aspects of derivative products and the practical applications of risk management tools in various contexts. A derivative security is an instrument whose value is derived from the value of one or more underlying assets. We cover several asset classes, including stocks, foreign exchange rates, interest rates, and commodities among others. We discuss a wide range of applications, including the use of derivatives in asset management/private banking as well as the 7 USD trillion structured products market and the exotic features of the options embedded in those products. We present a real life pricing tool used by the industry and discuss the daily life of a structurer and a structured products' trader.

The course studies various quantitative techniques for pricing financial derivatives under the assumption of no arbitrage opportunities in financial markets and the law of one price. It introduces to students the advanced techniques for pricing derivatives such as binomial trees and Black-Scholes-Merton model as well as it highlights their limitations.

The goal is for you to develop your intuition and skills on pricing and hedging of derivatives as well as understand the principles of how these important instruments and markets work in practice.

At the end of the course, students are expected to:

  • have a good understanding of derivative securities,
  • master the key features of various derivative instruments,
  • be able to price those securities, and
  • be able to decide which securities to use for hedging and/or speculative purposes.

Contenus

  • Introduction to Derivatives
  • Forward and Future Markets
  • Introduction to Options and Option Markets
  • Trading Strategies with Options
  • Introduction to Exotic Options
  • Structured products: Theory and practice
  • Pricing via Replication: One period binomial model
  • Pricing via Replication: Multi-period binomial model
  • Sensitivities (Distribution free characteristics)
  • Black-Scholes-Merton (BSM) model and sensitivities
  • BSM limitations

Références

  • Lecture slides and exercises provided during the course
  • J. Hull, Options, Futures, and Other Derivatives, 8th edition, Prentice Hall, 2011
  • S. E. Shreve, Stochastic Calculus for Finance I, The Binomial Asset Pricing Model, Springer, 2004

Pré-requis

Good knowledge of calculus and probability theory is required.

Evaluation

1ère tentative

Examen:
Ecrit TBA heures
Documentation:
Autorisée
Calculatrice:
Autorisée
Evaluation:
SUMMER 2020, due to coronavirus

2 take-home exams:

  • 1st exam (50% weight to final grade): available in Moodle on 24th April, 08:00, submission back by 29th April, 23:59. Scanned copy of answers should be submitted via Moodle
  • 2nd exam (50% weight to final grade): available in Moodle on 5th June, 08:00, submission back by 10th June, 23:59. Scanned copy of answers should be submitted via Moodle

Additional information on both exams can be found at Nuvolos dashboard.

Recordings of lectures also available at Nuvolos.

Rattrapage

Examen:
Ecrit TBA heures
Documentation:
Autorisée
Calculatrice:
Autorisée
Evaluation:

  • take-home exam - further details on the dates to be announced



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