Department of Finance

B401 Continuous-time Derivatives Pricing

Person responsible: Prof. Dr. Christian Koziol
Lecturer:

Prof. Dr. Christian Koziol and Sebastian Weitz, M.Sc.
Language: English
Recommended for:

1st year M.Sc

  • Accounting and Finance
  • Economics
  • Economics and Finance
  • European Economics
  • European Management
  • General Management
  • International Business
  • International Economics
  • Management
Course type and number of hours: 2 hours lecture + 2 hours practice course
ECTS credits: 9 ECTS
Type of exam: Assignment
Time and place:

Lecture: Monday, 2:15 PM – 3:45 PM, E03 (WiWi Seminar Mohlstraße 36)

Practice course: Monday, 4:15 PM – 5:45 PM, E03 (WiWi Seminar Mohlstraße 36)

Exception: At May 7th we switch to HS 25 (Kupferbau).

Goals

Content:

  • Fundamentals on stochastic processes for financial products
  • Properties of geometric Brownian motion
  • Option pricing using differential equations
  • Risk-neutral valuation
  • Derivation of Black-Scholes formula
  • Numercial methods

Objectives:
During this course students will obtain an in-depth knowledge in derivatives pricing by using continuous-time concepts of modern finance theory as well as their application to equity and other securities. Having completed this course, students will be able to approach the literature in this field successfully and apply continuous-time techniques for arbitrary derivatives pricing challenges.

Literature:

  • Hull, J. (2014): Options, Futures, and Other Derivatives, 9th ed., Upper Saddle River.
  • Shreve, S. (2010): Stochastic Calculus for Finance II: Continuous-Time Models, 2nd ed., Springer Finance.