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Financial Derivatives 2

Class at Faculty of Mathematics and Physics |
NMFP466

Syllabus

Introduction to standard and non-standard methods for stochastic modeling of financial processes. Risk-neutral pricing.

Change of numeraire and the equivalent martingale measure. Applications on valuation of selected exotic derivatives.

Interest rate modeling and valuation of interest rate derivatives. Calibration of models - numerical estimations of volatilities and correlations.

Credit risk modeling and credit derivatives.

Annotation

Stochastic modeling of stock prices, exchange rates, and interest rates. Introduction to standard and non-standard methods.

Risk-neutral pricing. Itô's lemma and the Black-Scholes formula.

Risk management for derivatives trading (Delta, Gamma etc., Value at Risk). Numerical estimations of volatilities and correlations.

Monte Carlo simulations - pricing of exotic options.