Options, Futures, And Other Derivatives By John C. Hull , Seventh Ed Edition, Published By Pearsin/Prentice Hall [ ]
|Stochastic Calculus For FInance I By Steven E Shreve Published By Springer [ ]|
|Stochastic Calculus For Finance II By Steven E Shreve Published By Springer [ ]|
After studying this course the students should be able to: understand financial derivative securities; Options , Forwards and Futures understand different types of financial derivative securities being practiced in the market, e.g., European, American and Asian Options draw pay-off diagrams (for above mentioned securities) analyse given situation for hedging and/or no-arbitrage analyse portfolios with multiple securities e.g. Bear, Bull spreads, Straddle, Butterflies etc. find price for forward or future contracts use Put-Call Parity to find bounds on option prices use binomial tree model to find option prices with both approaches (no-arbitrage and risk-neutral probability) drive Black-Scholes PDE and analyse its solution for EU Call and Put options do analyses using Black-Scholes’ Greeks
The course starts with the introduction of financial derivative securities. We will discuss Forward, Future Contracts, Call and Put Options (European, American and Asian). The pricing of these contracts will be discussed; first in discrete time (using binomial tree models) then in continuous time (using Brownian motion). The celebrated Black-Scholes-Merton PDE will be derived using no-arbitrage argument and the solution will be analysed in detail. In last part models beyond Black-Scholes will be discussed.