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2010/2011 KAN-OE22 Derivatives and Risk Management
| English Title | |
| Derivatives and Risk Management |
Course Information | |
| Language | English |
| Point | 7,5 ECTS (225 SAT) |
| Type | Mandatory |
| Level | Full Degree Master |
| Duration | One Semester |
| Course Period |
Spring
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| Time Table | Please see course schedule at e-Campus |
| Study Board |
Study Board for MSc in Advanced Economics and Finance |
| Course Coordinator | |
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| Main Category of the Course | |
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| Last updated on 29 maj 2012 | |
| Learning Objectives | |||||||||
Students are required to:
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| Examination | |||||||||
| Derivatives and Risk Management | |||||||||
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| Examination | |||||||||
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Oral exam with 7-step scale, external censorship, dates TBA. Exam format for the exam and reexam: Oral examination, 18-20 minutes, no preparation time, but prepared overhead transparencies (slides) are a part of the exam – see below. The examination has two parts: Part 1 (10 minutes): Three weeks before the exam, the students are given 5-7 topics for which they have to prepare a 10 minute presentation. At the beginning of the examination, the student chooses one of the topics at random and immediately thereafter gives the presentation. Only the prepared presentation is available to the student during the exam (no other notes, course material or exam aids of any form). Part 2 (8-10 minutes): The student is asked questions in parts of the curriculum different from the part covered in part 1. The implementation exercises given during the semester are part of the curriculum and can be made a part of the examination. Purpose of the exam: The exam tests the student’s ability to select important aspects of a topic and to present these aspects clearly and concisely. This ability is central to almost any career that the students would want to pursue in the future. | |||||||||
| Prerequisites for Attending the Exam | |||||||||
| Approval of two written assignments during the course. | |||||||||
| Course Content | |||||||||
The purpose of this course is to give students a thorough understanding of derivatives, models for pricing derivatives, and to understand their role in financial risk management. We cover the Black-Scholes-Merton option pricing model and some alternatives. We give an overview of fixed income securities and discuss bond pricing, the term structure of interest rates and term structure derivatives, including prepayment options in mortgage-backed securities. Credit risk and credit derivatives are also covered, as is Value-at-Risk (VaR) and related risk measures. The course will present numerical techniques frequently applied in derivatives pricing problems. The course is a fundamental quantitative finance course with wide applications in advanced financial institutions. It builds heavily on the first semester course in Asset Pricing Theory and to some extent on Corporate Finance. | |||||||||
| Teaching Methods | |||||||||
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The format of the course is based on the following elements: • Class lectures devoted to the fundamental theoretical issues • Class exercises • Two written assignments | |||||||||
| Literature | |||||||||
John C. Hull, “Risk Management and Financial Institutions”, 2010 (main textbook for the course). | |||||||||