DERIVATIVE PRICES AND RISK MANAGEMENT

Università degli Studi
"G. d'Annunzio"

Chieti - Pescara

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Single discipline educational activity

Course Sheet

Course code:

000242L

Academic Year of enrolment:

2018

Year of supply:

2019/2020

Type of Course:

Characterising

Degree:

Course of 2nd Cycle Degree in ECONOMICS AND COMMERCE

Disciplinary Sector:

Probability and Mathematical Statistics

Location:

PESCARA

Credits:

Programme Year:

Professor and Collaborators:

CECI Claudia

Cycle:

First semester

Hours of classroom activity:

Individual study hours:

153

Prerequisites:

Probability and Mathematical Analysis

Objectives

The course aims to provide mathematical and probabilistic models and concepts
for the study of continuous-time financial markets, in particular for
financial risk management, hedging and
pricing of derivative securities, including credit derivatives.
The course aims to provide specific quantitative knowledge
- for professional figures operating in financial markets, including the
"Market risk analyst", the "risk manager" and the "credit risk analyst";
- for research activities in Finance;
- for the profession of Financial Advisors.

Contents

Stochastic processes in continuous time. Stochastic differential equations.
Financial Markets in continuous time. Derivatives hedging and risk-neutral pricing. Introduction to credit risk models.

Extended Syllabus

Elements of stochastic calculus:
Stochastic processes in continuous time. Brownian motion. Filtrations and conditional expectations. Martingales, sub-martingales and super-martingales. The Ito's integral. Stochastic differential equations. Geometric Brownian motion.The Ito's formula. The Girsanov Theorem.

Financial Markets in continuous time:
The Black & Scholes model. Risk-neutral pricing. Delta-hedging and delta-vega hedging. The Black & Scholes PDE. Implied volatilty and volatility smile. Greek letters. Robustness. Multi-dimensional financial market models. The market price of risk. Complete and incomplete markets. The Heston model.

Credit risk models:
Structural models. The Merton model. Hazard rate models with deterministic hazard rate. DZCB and CDS pricing.

Recommended Bibliography

- Andrea Pascucci, Calcolo stocastico per la finanza. Springer.
- McNeil, Frey,Embrechts, Quantitative Risk Management, Princeton Series in Finance
- Lecture notes provided by the teacher
- Exercise sheets available on the teacher's website (https://economia.unich.it/)
- The textbook is also available in English and the on-line material is available in English, upon request

Methods of Provision

Conventional

Teaching Methods

The course is structured in 72 hours of frontal teaching, consisting of theoretical lessons and exercises sessions. The exercises proposed by the teacher are intended to verify the practical application of the topics seen at a theoretical level.

Evaluation methods

Verification of learning:

The final exam will consist of both a written test and an oral exam. The written test will be composed of exercises and problems and the oral exam will be on theoretical topics.
Both the written text and the oral exam can be taken in English.

Contacts/More Information

Weekly office hours (see the teacher web page https://economia.unich.it/
E-mail: c.ceci@unich.it
Office hours can also be in English.

Other courses

Course year: 1

ADVANCED FINANCE
9 Credits - Characterising
MEASUREMENT AND FINANCIAL RISK MANAGEMENT
6 Credits - Characterising
STATISTICAL METHODS FOR ECONOMIC ANALYSIS
9 Credits - Characterising
TIME SERIES ANALYSIS
9 Credits - Characterising
CONTRACT LAW
6 Credits - Related/Supplementary
STOCHASTIC PROCESSES
6 Credits - Related/Supplementary
ELECTIVE COURSE
9 Credits - Elective Course
ORGANIZATION AND PLANNING TOURISM
9 Credits - Elective Course
URBAN AND REGIONAL GEOGRAPHY
9 Credits - Elective Course
SEMINARS
3 Credits

Course year: 2

INFORMATICS FOR FINANCE
6 Credits
ADVANCED MACROECONOMICS
9 Credits - Characterising
DERIVATIVE PRICES AND RISK MANAGEMENT
9 Credits - Characterising
ECONOMIC AND FINANCIAL TIME SERIES
6 Credits - Characterising
MATHEMATICAL MODELS FOR INVESTMENT DECISIONS
6 Credits - Characterising

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DERIVATIVE PRICES AND RISK MANAGEMENT