INFORMATION ABOUT THE COURSE - Strona głwna ABOUT THE COURSE ... Scholes model: derivation of pricing PDE, ... Shreve S.E., Stochastic calculus for finance, ...

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<ul><li><p>INFORMATION ABOUT THE COURSE </p><p> COURSE TITLE: EQUITY AND FOREIGN EXCHANGE DERIVATIVES </p><p>COURSE CODE: M3.1 CREDIT POINTS (ECTS): 2 </p><p>COURSE LEADER: Tadeusz Czernik PhD </p><p>TEACHING STAFF: Tadeusz Czernik PhD </p><p>DIRECT CONTACT HOURS: 15 </p><p>DURATION: ONE semester </p><p>SEMESTER OF DELIVERY: Winter </p><p>FACULTY: Finance &amp; Insurance </p><p>LEVEL OF THE MODULE: Master: Quantitative Asset and Risk Management ARIMA </p><p>PREREQUISITIES </p><p>Obligatory: Students should have a basic working knowledge of Mathematics and </p><p>Statistics </p><p>Recommended: Fundamentals of Finance </p><p>OBJECTIVES: </p><p>- to give intensive practice in derivative pricing methodologies </p><p>- to develop analytical skills in stochastic modeling of financial derivatives </p><p>TEACHING AND LEARNING METHOD: </p><p>No Teaching method Description Hours (45) 1 formal teaching formal lecture with formulae description 6 </p><p>2 practice exercises solving exercises with personal calculator 6 </p><p>3 work in groups discussion of some practical issues 2 </p><p>4 progress check revision session 1 </p><p> SUM 15 </p><p>No Learning method Description Hours (45) </p><p>1 individual literature </p><p>studies researching and reading 20 </p><p>2 individual work solving exercises 10 </p><p>3 case studies solving received case studies 5 </p><p> SUM 35 </p></li><li><p>CONTENTS: </p><p>1. Binomial tree: calibration, vanilla and exotic options pricing, European and </p><p>American options pricing, replication portfolios, hedging, risk-neutral measure </p><p>2. Introduction to stochastic calculus: Wiener process, stochastic differential </p><p>equations, Itos theorem, expected value of a stochastic processes </p><p>3. Geometric Brownian motion: motivation, SDE, expected value and variance </p><p>4. Black Scholes model: derivation of pricing PDE, solution methods, relation to </p><p>binomial tree, risk-neutral measure and Feynman-Kac theorem </p><p>5. Greeks and sensitivity analysis: hedging, portfolios </p><p>6. Introduction to FX derivatives </p><p>LEARNING OUTCOMES: </p><p>After completing the course a student might be able: </p><p>- to find a price of equity and foreign derivative instruments </p><p>- to construct hedging portfolios </p><p>- to calibrate binomial and Black Scholes models </p><p>ASSESSMENT METHOD: </p><p>No Assessment method Description Weighting (%) </p><p>1 case study solving problems 90% </p><p>2 test multiple choice test 10% </p><p>CORE READING </p><p>K.Cuthbertson, D.Nitzsche: Quantitative Financial Economics, Wiley 2004 </p><p>Wilmott P. Paul Wilmott on Quantitative Finance, Wiley 2006 </p><p>Hull J.C., Options, Futures and other Derivatives, Pearson Prentice Hall 2009 </p><p>INDICATIVE LITERATURE </p><p>Shreve S.E., Stochastic calculus for finance, vol. 1,2, Springer 2008 </p><p>Haug E.G., The Complete Guide to Option Pricing Formulas, McGraw_Hill 2007 </p><p>LANGUAGE: English </p></li></ul>

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