First Semester of Academic Year 2010-2011
MA 471 Financial Engineering II
Syllabus

Pre-requisite: MA 372 Stochastic Calculus for Finance

Continuous time financial market models, Black-Scholes model, Black-Scholes PDE and formulas, risk-neutral valuation, change of numeraire, pricing and hedging of contingent claims, Greeks, implied volatility; Options on futures, European, American and Exotic options. Incomplete markets, market models with stochastic volatility, pricing and hedging in incomplete markets. Bond markets, term-structures of interest rates, bond pricing; Short rate models, martingale models for short rate (Vasicek, Ho-Lee, Cox-Ingersoll-Ross and Hull-White models), multifactor models; Forward rate models, Heath-Jarrow-Morton framework, pricing and hedging under short rate and forward rate models, swaps and caps; LIBOR and Swap market models, caps, swaps, swaptions, calibration and simulation. Introduction to credit risk modeling, credit derivatives, CDS and CDO.

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