Derivatives (Derivative Products and Risk Management)
中文課名：衍生性金融商品
授課教師：陳釗而
研究室：台大國際政經學院 忠興研究館401
Course Description
This course examines a broad range of derivative products and discusses how risks are managed by the middle office of a financial institution.
Course Objective
At the end of the course, students should (a) be familiar with most of the products that they are likely to encounter in financial markets, and (b) understand how market risk and credit risk is quantified by banks and other financial institutions.
Course Outline
Week０: Asset Pricing Frameworks [slides]
Week 1: Options and the Options Market [slides]
Chapters 1.5, 10, 11, and 12 – Options; Mechanics of Options Markets; Properties of Stock Options; Trading Strategies Involving Options
Week 2: Tools [slides]
Chapters 13 and 14 – Binomial Trees; Wiener Processes and Ito’s Lemma
Week 3: Standard Products and Models [slides]
Chapters 15, 17, and 18 – The Black-Scholes-Merton Model; Options on Stock Indices and Currencies; Futures Options and Black’s Model
Week 4: Greek Letters and Volatility Smiles [slides]
Chapters 19 and 20 – The Greek Letters; Volatility Smiles and Volatility Surfaces
Week 5: Binomial Trees (review) and Monte Carlo Simulation [slides]
Chapter 21.1 to 21.7 – Basic Numerical Procedures
Week 6: Exotic Options [slides]
Chapter 26 – Exotic Options
Week 7: Value at Risk [slides]
Chapter 22 – Value at Risk and Expected Shortfall
Week 8: Estimating Volatilities and Correlations [slides]
Chapter 23: Estimating Volatilities and Correlations
Weeks 9-10: Credit Risk and Credit Derivatives [slides]
Chapters 24 and 25 – Credit Risk
Week 11: Bond Options and Convertibles [slides]
Sections 27.4 and 29.1
Optional: Week 12: European Interest Rate Options [slides] [學期剩下的時間不夠，會略過這週的主題]
Sections, 29.2 to 29.4 – Interest Rate Derivatives: The Standard Market Models
Week 13: Industry Professional Guest Lectures (業界專業專題演講)：Dec. 16. We are pleased to welcome a strategy manager from a long-established quantitative investment management firm based in London. The firm has long provided quantitative investment strategies to global institutional investors and professional investment channels. Drawing on original research, rigorous statistical analysis, and deep experience in financial markets, it researches, designs, and implements systematic investment strategies.
Optional: Week 14: Nonstandard Swaps [slides] [學期剩下的時間不夠，會略過這週的主題]
Chapter 34 – Swaps Revisited
Week 15: Energy and Commodity Derivatives [slides]
Chapter 35 – Energy and Commodity Derivatives
Week 16: Real Options; Review of Course [slides]
Chapter 36 and 37 – Real Options; Derivatives Mishaps and What We Can Learn from Them
Required Readings
Hull, John C. Options, Futures, and Other Derivatives, 11th Edition
Assessment
There are three hand-in assignments during the semester:
Assignment 1 (15%): (due week 5)
Assignment 2 (15%): (due week 10)
Assignment 3 (15%): (due week 15)
Final Exam (55%)
The final examination will not be open book. You will be permitted a two-sided “cheat sheet” with notes and/or formulae.
Jauer 