Derivatives (Derivative Products and Risk Management) SPEFI7005
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 忠興館401
Course Description
This course introduces the pricing, trading, hedging, and risk management of derivative securities. Topics include options, binomial trees, the Black–Scholes–Merton model, Monte Carlo simulation, the Greeks, volatility, Value at Risk, credit risk, exotic options, commodity derivatives, and real options. The course combines financial theory with practical applications in risk management and investment.
Course Objective
By the end of the course, students should be able to: evaluate the assumptions and limitations of derivative pricing models; understand the main derivative products and their uses; apply standard models and numerical methods to price derivatives; explain how derivatives are used for hedging and risk management; measure and interpret market risk, volatility, and credit risk.
AI teaching assistant (spefi7005-ta)
This is the student-facing AI teaching assistant for Derivatives, taught by Jau-er Chen. It is designed to answer questions based on the course syllabus and lecture notes and to support students in understanding key concepts and working through course materials. It should be used as a learning partner rather than simply as a search engine or answer generator.
To get started, download and unzip this repository, then follow the instructions in README.md to set up and use the AI teaching assistant.
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
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
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 13: Energy and Commodity Derivatives [slides]
Chapter 35 – Energy and Commodity Derivatives
Week 14: Real Options; Review of Course [slides]
Chapter 36 and 37 – Real Options; Derivatives Mishaps and What We Can Learn from Them
Week 15: Industry Professional Guest Lectures (業界專業專題演講)：Introduction to Systematic Equities Trading. 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. Through this industry lecture, students will gain an understanding of the basic framework and practical implementation of systematic equities trading. Using a real-world example of an options pricing signal, they will learn how concepts from options pricing covered in class can be applied to systematic investment strategies. Drawing on industry experience, the speaker will also discuss the practical limitations and implementation challenges that theoretically sound trading signals may encounter in real-world markets, and why models or signals may fail to deliver the expected results in practice. The lecture is intended to help students bridge financial theory and market practice while developing their ability to critically evaluate the feasibility of quantitative trading strategies.
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 