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.