2025/2026
Derivatives
Type:
Mago-Lego
Delivered by:
International College of Economics and Finance
When:
1 module
Open to:
students of one campus
Instructors:
Dmitry Makarov
Language:
English
Contact hours:
48
Course Syllabus
Abstract
Part of Dmitry Makarov. Prerequisites: Financial Economics I, Intermediate Calculus, Probability Theory, Mathematical Statistics. The course examines fundamental topics and approaches in derivative pricing. It is quantitatively oriented and requires some background in calculus and statistics. Derivative financial instruments are those instruments whose value is “derived” from the value of some underlying asset or assets. Our goal is to learn how to price such instruments using a no-arbitrage principle, and how to hedge them. The course will be particularly relevant to students interested in financial markets, securities trading and structured products development involving derivatives.
Part of Veronika Chistotinova. Pre-requisites: profound knowledge in economics and finance is appreciated (time value of money, CAPM, probability theory, bonds, equities, main risks associated with financial products). Basic skills of Python programming are welcomed.
Abstract: this course is aimed at students who want to pursue career in financial industry and seek for practical side of known theoretical concepts. Objective of the course is to provide well-grounded overview of derivatives pricing and dealing in modern financial markets. Main focus is to familiarize students with market infrastructure as a system, institutions involved into derivatives business and instruments features. During the course students will learn important and practical concepts of derivatives trading. This is vital for the graduates because anyone new to the industry is expected to be up-to-speed within months if not weeks, of starting out. The course is based on lectures, seminars, team work and self-study.
Learning Objectives
- The objective of the course is to undertake a rigorous study of derivative financial instruments.
Expected Learning Outcomes
- practical approaches to derivatives valuation, hedging strategies
- distinguishing between main derivative instruments and different types of options
- finding an option price through binomial pricing
- finding an option price using Black-Scholes approach
- finding an option price under multiple sources of uncertainty
- applying structural and reduced-form approach to credit risk modelling to calculate default probabilities
- understanding main differences between the different types derivatives and understand their nature, outline how the OTC derivatives work
- constructing a replicating portfolio
- constructing swap contract for a given position of a firm
- calculating returns on particular structured products
- bond hedging with bond futures
Course Contents
- Fundamentals of derivative pricing: Overview
- Option pricing: static and discrete-time analysis
- Option pricing in continuous time
- Pricing with multiple sources of uncertainty
- Structural and reduced-form models of credit risk
- Exchange-based and OTC derivatives
- Options and an introduction to Structured Certificates
- Short Term interest Rates and Bonds
- Swaps
- Structured Equity Products
Assessment Elements
- home assignment 1
- Exam
- practitioner's home assignmentHome assignment may include individual or group case studies that will comprise aspects learnt during the course.
- home assignment 2
Interim Assessment
- 2025/2026 1st module0.55 * Exam + 0.1 * home assignment 1 + 0.1 * home assignment 2 + 0.25 * practitioner's home assignment
Bibliography
Recommended Core Bibliography
- Hull, J. C. (2017). Options, Futures, and Other Derivatives, Global Edition. [Place of publication not identified]: Pearson. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=1538007
Recommended Additional Bibliography
- Paul Wilmott. (2013). Paul Wilmott on Quantitative Finance. [N.p.]: Wiley. Retrieved from http://search.ebscohost.com/login.aspx?direct=true&site=eds-live&db=edsebk&AN=185503