This course covers standard derivative pricing models. Both discrete time and continuous time techniques are considered. The course also includes an introduction to numerical option pricing, in particular the Monte Carlo Method. After this course, students should have a good knowledge of financial markets, security pricing, arbitrage, interest rates, risk and return. Contents: 1) Definition and classification of financial assets 2) Discrete-time pricing models 3) Continuous-time pricing models 4) Fixed income products 5) Monte Carlo methods for derivative pricing
A single period model of security prices: pricing via replication
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From the lesson
Discrete time models
By the end of this week, you will understand the replication of a payoff function, state prices and risk neutral probabilities. Additionally, you will learn how to compute option prices in discrete time models.
Taught By
Giuliano Curatola
Associate Professor of Economics