Course Page

Options

Course Number:

45823


Faculty

Duane Seppi, ds64@andrew.cmu.edu


Program

MBA


Concentrations

Finance


Course Description

The primary focus is on pricing and hedging contingent claims -- that is assets with option-like features. Examples include calls, puts, structured products, corporate securities, and real options. The models to be studied include Black-Scholes, binomial, and risk-neutral Monte Carlo pricing. Specific topics include simple no-arbitrage pricing relations (e.g., put-call parity), the Greeks (e.g., delta, gamma, theta, vega), implied standard deviations and their statistical properties, exotic options, portfolio insurance and other dynamic option trading strategies, and futures and forward contracts. By its very nature, the course uses mathematics and statistics intensively. However of all subjects in finance, the area of derivatives securities uses these tools to the greatest profit. Our goals are 1) to become proficient at the fundamental option calculations and 2) to understand the underlying assumptions and pros and cons of the most widely used options models. (DS 6/13)


Format

Lecture: 100min/wk and Recitation: 50min/wk


Pre-requisites

45720 OR 45820