AØKK08095U Pricing Financial Assets

Volume 2014/2015
Education
MSc in Economics
The course is part of the Financial line symbolized by "F".
Content

The course will cover valuation of financial assets and derivatives with an emphasis on arbitrage pricing and hedging. Elementary finance as in Corporate Finance and Incentives, BSc, 3rd year must also be covered

Learning Outcome

The students will acquire an understanding of core areas of modern financial theory and the ability to apply different models of this field to problems of both theoretical and practical interest.

At the end of the course the student should also be familiar with main types of financial assets and derivatives, their risk characteristics and be able to discuss and apply relevant methods for pricing and hedging.
Students are also expected to obtain an understanding of the mathematical methods related to these models including selected proofs and numerical methods.

The excellent performance is characterized by a good knowledge of the theories, methods, models and proofs covered in the course together with the ability to apply these competencies to theoretical and practical problems more generally than the examples covered in the syllabus, utilizing both discrete time models and continuous time models.

Syllabus
Textbook: John C. Hull: "Options, Futures and Other Derivatives," 8th edition 2012, Pearson Education, Prentice-Hall.
Notes: Frank Hansen: "Supplements in Finance Theory,” 2009, University of Copenhagen.
The binomial model; Hull Chapter 12.
The one-period model; Suppl. Section 1, pp. 2-5.
The multi-period model; Suppl. Section 2, pp. 7-14.
Wiener processes and Ito's lemma; Hull Chapter 13.
The Black-Scholes-Merton model; Hull Chapter 14.
Options on stock indices and currencies; Hull Chapter 16.
Futures options; Hull Chapter 17.
The Greek letters; Hull Chapter 18.
Credit risk; Hull Chapter 23.
Credit derivatives; Hull Chapter 24.
Martingales and measures; Hull Chapter 27.
Interest Rate Derivatives: The standard market models; Hull Chapter 28.
Interest Rate Derivatives: Models of the short rate; Hull Chapter 30.
Interest Rate Derivatives: HJM and LMM; Hull Chapter 31.

The course requires certain knowledge of basic microeconomics and elementary mathematics and statistics. The course also requires the BA-course in finance.
2 hours of lectures 1-2 times per week for 14 weeks.

Time and room:
Time and room for the lectures and exercise classes: Please press the link under "Se skema" (See schedule). 15F means Spring (Forår) 2015, 14E means Autumn (Efterår) 2014.
The springsemester is available partly in English at this link:
https:/​/​skema.ku.dk/​KU1415/​reporting/​textspreadsheet?objectclass=module&idtype=id&identifier=43794&t=SWSCUST+module+textspreadsheet&days=1-5&weeks=27-52&periods=1-68&template=SWSCUST+module+textspreadsheet

The first lecture in the springsemester will be the 3.th of February 2015 at 8.00 o´clock (AM). The 5.th of February is canceled and instead this lecture will be taugth the 10.th of February.
  • Category
  • Hours
  • Exam
  • 3
  • Lectures
  • 42
  • Preparation
  • 161
  • Total
  • 206
Credit
7,5 ECTS
Type of assessment
Written examination, 3 hours under invigilation
A 3 hours written assignment without any aids.
Aid
Without aids
Marking scale
7-point grading scale
Censorship form
External censorship
100 % censurship
Exam period
For the Spring semester 2015: From 26 May to 28 June 2015 Written exam will be the 23 of June 2015 The written exam takes place at Peter Bangsvej 36, 2000 Frederiksberg http://pc-eksamen.ku.dk/pc_exam More information is available at https://intranet.ku.dk/economics_ma/examination/Pages/default.aspx
Re-exam
Same as ordinary. But if only a few students have registered for the re-exam, the exam might change to an oral exam with a synopsis to be handed in. This means that the examination date also will change.
Criteria for exam assesment

The student must in a satisfactory way demonstrate that he/she has mastered the learning outcome of the course.