Teaching starts Autumn

Language of instruction English

Learning outcomes After taking the course the students should be able to: give an overview of different financial derivative contracts describe and use basic risk management strategies involving derivatives have a deep understanding of the theory of the pricing of derivative contracts. understand the program flow and write simple computer programs estimate the parameters of price processes simulate different price processes implement pricing formulas using simulation analysis compute prices of derivative securities where explicit solutions are not available analyze equity-linked products with build-in options

Course contents This course is about the pricing and the use of derivative securities. Essentially, a derivative security is a financial asset which payoff and, hence, the price depends on the price of some other financial asset. The main examples of derivative securities are swaps, forwards, futures, and options. Derivatives are very important part of a modern financial market and companies extensively use derivatives to protect themselves against unfavorable market moves and uncertainties. Many financial companies offer guaranteed investment products where the loss is limited due to the use of options. The course objectives are two-fold: give the theoretical understanding of modelling the prices of financial assets and the pricing of derivatives securities, and give hands-on practical skills in implementing the theoretical models. That is, this course is designed to represent a well-balanced mixture of theory and practice, with a larger emphasis on practice. During the course the students are supposed to use MATLAB software package to perform simulations and computations.

Teaching methods Lectures along with practical exercises in computer lab

Examination requirement Approved compulsory assignment

Assessment methods and criteria 4-hour written examination with graded marks

Type of course Theoretical

Level of course Graduate

Year of study Normally fourth year

Name of lecturer/contact person Head of Department Andre Tofteland or Academic International Coordinator Oddmund Wallevik

Mode of delivery Face-to-face