Derivatives markets are an important and growing segment of financial markets and play an important role in the management of risk.
This invaluable set of lecture notes is meant to be used in conjunction with a standard textbook on derivatives in an advanced undergraduate or MBA elective course on futures, forwards, swaps, options, corporate securities, and credit default swaps. It covers the foundations of derivatives pricing in arbitrage-free markets, develops the methodology of risk-neutral valuation, and discusses hedging and the management of risk.
Contents: Introduction to Forward and Futures ContractsPricing Forwards and FuturesInterest Rate and Currency SwapsIntroduction to Options and No-Arbitrage RestrictionsTrading Strategies and Slope and Convexity RestrictionsOptimal Early Exercise of American OptionsBinomial Option PricingUsing the Binomial ModelThe Black–Scholes–Merton Option Pricing FormulaOptions on FuturesRisk ManagementEmpirical Evidence and FixesCorporate Securities and Credit RiskReadership: Advanced undergraduates and postgraduate students of finance along with MBA students taking an elective on derivatives and risk management in finance.Key Features:Develops the theory of arbitrage-free derivatives pricingCovers a broad set of derivatives including futures, forwards, swaps, options, corporate securities, and credit default swapsDiscusses hedging and risk management
Transfer risk from those who have it to those who want it.
derives its value from one or more underlying asset prices, reference rates, or indices.