Financial Economics D2

The objective of the course is to provide a deep knowledge and understanding for financial derivatives. The course starts by describing the futures market. The mechanics of the futures markets, hedging strategies using futures and the determination of forward and futures prices are described. A subsequent part of the course covers interest and currency swap contracts. The second part of the course is devoted to options. Mechanics of options markets, properties of stock options and trading strategies involving options are covered. Other topics regard binomial trees, Wiener processes and Ito´s Lemma, the Black-Scholes-Merton model for option pricing, options on stock indices, the Greek letters, volatility smiles and estimation procedures. Credit risk, credit derivatives, exotic options and interest rate derivatives are also covered.