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Instructors: Sebastian Golder; Mick Schaefer; Prof. Dr. Alexander Szimayer
Event type:
Interactive class
Displayed in timetable as:
Hours per week:
3
Credits:
6,0
Language of instruction:
English
Min. | Max. participants:
- | 45
Comments/contents:
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Due to the Corona crisis, we will use the application “Zoom” to provide online live lectures and tutorials for this course. Both, lectures and tutorials will take place as scheduled in STiNE. Note that, the first lecture starts at 10:15 by April 21, and the first tutorial starts at 11:00 by May 4.
Via STiNE mail, we will send you links, IDs, and passwords for repetitive Zoom meetings, in which we will give the lectures and tutorials.They are recurrent, which means that you can use those links, IDs and passwords throughout the whole semester. However, the host must be online to activate the meeting. We will be present roughly 5 minutes before the course starts officially.
To connect with Zoom, please, use your UHH credentials (STiNE-Kennung) to sign in at https://uni-hamburg.zoom.us/. As you signed in, you can join our meetings using the links or IDs given above. For the identification of the students, we ask you kindly to use only UHH credentials and no private accounts to sign in.
If you use Zoom for the first time, please, take roughly 30 min to download it, which happens automatically if you try to join a meeting, and to get familiar with the application. In particular, ensure that your speakers, headphones and microphones work properly.
https://www.rrz.uni-hamburg.de/services/weitere/medienkompetenz/videokonferenzen/zoom/meeting-beitreten.html . Unfortunately, this guide seems to be only available in German.The course deals with options, futures contracts and other derivatives financial instruments. Firstly, the basics of forward and future contracts as well as their valuation by using the No-Arbitrage Principle are revised. This is followed by a short presentation of options and their valuation using the binomial model.
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About the course
The course deals with options, futures contracts and other derivatives financial instruments. Firstly, the basics of forward and future contracts as well as their valuation by using the No-Arbitrage Principle are revised. This is followed by a short presentation of options and their valuation using the binomial model.
The focus is directed on the analysis of the Black-Scholes-Model for valuation of share options. In particular, the Black-Scholes-formula for valuing a call-option will be derived. For this purpose, the necessary knowledge of the Wiener process and stochastic integration is built up.
The sensitivities, the so-called Greeks, related to the pricing formulas, according to Black-Scholes, are discussed and their application in risk management is shown. Afterwards options on currencies, commodities and futures are discussed and invest rate derivatives and credit derivatives are introduced. Numerical valuation methods as for instance Monte-Carlo simulation are briefly discussed.
Learning objectives:
On completion of this course, you should be able to:
- value derivative contracts like futures, forwards and for deriving option price bounds using the no-arbitrage principle
- detect arbitrage opportunities
- apply risk-neutral valuation as a generic methodology for various setups including pricing of standard options (calls and puts), and exotic options
- grasp the derivation of the Black-Scholes option pricing model based on Brownian motion and Ito calculus
- hedge and manage option portfolios utilizing the Black-Scholes Greeks (sensitivities of the option price)
Literature:
John C. Hull, Options, Futures, and Other Derivatives (8th Ed.), Pearson
Additional examination information:
Written examination
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