Executive Summary: FINA 6541
Course Name: Options, Futures, and Derivatives
Course Number: FINA 6541 Credits: 2
Prerequisites: FINA 6622
This course is a continuation of FINA 6622 “Financial Risk Management.” It covers
more advanced models for pricing and hedging options, swaps, and credit derivatives.
Course topics include:
The multi-period binomial tree model for replicating, valuing, and hedging
options on stocks, commodities, and exchange rates.
The risk-neutral approach to valuing options in a multi-period binomial tree.
Valuing options on dividend-paying assets.
Pricing and hedging American options in a multi-period binomial tree.
The real options approach to making investment decisions.
Pricing and hedging with the Black-Scholes option pricing model.
Option valuation via Monte Carlo simulation.
Option pricing when the volatility of the underlying asset is stochastic.
Replication and valuation of interest rate, currency, and commodity swaps.
Merton’s structural model for default risk and defaultable bond prices.
Valuation of credit default swaps, basket default swaps, and collateralized debt
obligations (CDOs) using reduced-form models of credit risk (risk-neutral default