Financial Derivatives (2019-2020)

Dr Anna Ananova
Course Term: 
Course Overview: 

This course provides an introduction to the principal models that underpin modern financial practice and theory - the Black-Scholes model and generalisations of it. The course examines in detail the pricing of `vanilla' options, their uses, and their risk characteristics. Building on this, a variety of more complex derivatives are also analysed.

Course Syllabus: 

Financial markets. Characteristics of price time series. Derivative contracts and their uses. The binomial model and option pricing. Call and put options. Risk neutrality. The Black-Scholes model, hedging and replication, option prices as solutions of a partial differential equation, and as expectations. Martingale framework. Exotic and American options.

Reading List: 

1) T Bjork, Arbitrage Theory in Continuous Time, OUP (1998) - available online from Oxford Scholarship Online:
2) P Wilmott, S D Howison and J Dewynne, Mathematics of Financial Derivatives, CUP (1995)
3) A Etheridge, A course in Financial Calculus, CUP (2002)
4) Shreve, Stochastic Calculus and Finance, (Springer 2004)

Please note that e-book versions of many books in the reading lists can be found on SOLO and ORLO.