Course Code : | 2104TEWFIN |

Study domain: | Finance |

Academic year: | 2019-2020 |

Semester: | 1st semester |

Contact hours: | 45 |

Credits: | 6 |

Study load (hours): | 168 |

Contract restrictions: | No contract restriction |

Language of instruction: | English |

Exam period: | exam in the 1st semester |

Lecturer(s) | Marc De Ceuster |

At the start of this course the student should have acquired the following competences:

an active knowledge of

an active knowledge of

- English

- intermediate knowledge of probability theory: knowledge of probability distributions and basic concepts such as correlation, variance, regression, confidence intervals and statistical hypotheses
- basic knowledge of mathematical analysis: calculus and differential equations
- basic knowledge of financial management and analysis: knowledge of discounting, i.e. the calculation of the present value of cash flows and of basic investment products such as bonds and stocks

- Analyst: You are able to identify the main financial risks any undertaking faces.
- Analyst: You are able to determine forward and futures prices.
- Analyst: You are able to understand how swaps are designed, used, and valued.
- Analyst: You are able to understand what option "greeks" are and how they can be used in hedging strategies.
- Analyst: You are able to see the application potential of mathematics in financial risk management.
- Analyst: You are able to understand the use and abuse of financial derivatives.
- Coordinator: You are able to calculate the value of forward contracts.
- Coordinator: You are able to calculate a bond's price and duration.
- Coordinator: You are able to valuate options via numerical trees and the Black-Scholes-Merton model.
- Coordinator: You are able to calculate the profit resulting from various option trading strategies.
- Coordinator: You are able to calculate the Value-At-Risk of a portfolio via historical simulation or through parametric methods.
- Coordinator: You are able to decide which risk management strategy is appropriate for a particular portfolio.
- Coordinator: You are able to work diligently and with precision, knowing that mistakes in a risk management environment can be very costly.

This course introduces students to the key elements of financial risk management. It examines a broad range of derivative products and demonstrates how they can be used.

The course first introduces the mechanics of exchange-traded futures markets, hedging strategies using futures and the determination of forward and futures prices. We examine how swaps are designed, used and valued. The mechanics of options markets, the properties of stock options and trading strategies involving options are also discussed.

An important aspect of this course is its focus on the valuation of options:

- numerical trees for valuing options using both no-arbitrage arguments and risk-neutral valuation
- the Black-Scholes-Merton option pricing model for valuing European call and put options
- option sensitivities (Greeks) and their applicability in hedging strategies

Once options have been covered, the course proceeds by discussing various methods for calculating the value at risk (VaR) in a portfolio of financial assets.

The course has an international dimension.

Class contact teachingLectures

Personal workAssignments Individually

**5.3 Facilities for working students ***

Others

Personal work

Others

Slides and additional study materials available via Blackboard

ExaminationWritten exam: electronic Closed book Multiple-choice Open-question

Continuous assessmentAssignments

Continuous assessment

The handbook that we will be using is:

Options, Futures, and Other Derivatives, John C. Hull, 8th edition, Prentice Hall

An extensive reference list will be given in class. However, studying selected chapters of the handbook should suffice

By e-mail: marc.deceuster@uantwerpen.be