154-0340/01 – Valuation and Hedging of Financial Derivatives (Hedging)
| Gurantor department | Department of Finance | Credits | 3 |
| Subject guarantor | prof. Ing. Tomáš Tichý, Ph.D. | Subject version guarantor | prof. Ing. Tomáš Tichý, Ph.D. |
| Study level | undergraduate or graduate | Requirement | Choice-compulsory |
| Year | 2 | Semester | winter |
| | Study language | Czech |
| Year of introduction | 1999/2000 | Year of cancellation | 2009/2010 |
| Intended for the faculties | EKF | Intended for study types | Follow-up Master |
Subject aims expressed by acquired skills and competences
This course aims at pricing, hedging and modeling of financial derivatives as well as primary financial securities. The aim of the course is
- to improve the knowledge and skills of students
- so that they will be able to apply acquired knowledge
- in order to efficiently utilize financial derivatives within risk management issues of both, financial and nonfinancial institutions;
- the students should be able to formulate pricing and hedging task and subsequently propose an efficient approach to solve it.
Teaching methods
Lectures
Summary
Within this course, particular problems of financial derivatives, their
pricing, hedging, replication and modelling in general are treated. At first,
particular sorts of derivatives, methods of pricing and most common types of
underlying assets and related processes are introduced. Subsequently, these
methods and types of underlying assets are applied in order to model the price
of basic types of financial derivatives. Single topics are constituted by non-
standard derivatives.The task is to allow the students to use obtained
knowledge in solving of real problems.
Compulsory literature:
HULL, J.C. Options, futures, and Other Derivatives. 11th ed. Harlow: Pearson, 2022.
HULL, J.C. Risk Management and Financial Institutions. 5th ed. New York: Wiley, 2018.
TICHÝ, T. Lévy Processes in Finance: Selected applications with theoretical background. SAEI, vol. 9. Ostrava: VŠB-TU Ostrava, 2011.
Recommended literature:
NEFTCI, S. Principles of Financial Engineering. 2nd ed. Academic Press, 2008.
SCHOUTENS, W. Lévy Processes in Finance: Pricing Financial Derivatives. Wiley, 2003.
SHREVE, S. E. Stochastic Calculus for Finance I: The Binomial Asset Pricing Models. Springer, 2004.
SHREVE, S. E. Stochastic Calculus for Finance II: Continuous-Time Models. Springer, 2004.
Additional study materials
Way of continuous check of knowledge in the course of semester
E-learning
Other requirements
Prerequisities
Subject has no prerequisities.
Co-requisities
Subject has no co-requisities.
Subject syllabus:
Introduction to financial markets and derivatives
Linear financial derivatives (forwards, futures, swaps)
Nonlinear financial derivatives (plain vanilla options, exotic options)
Discrete valuation methods (binomial and trinomial trees)
Stochastic processes
Continuous valuation models (BS model)
Monte Carlo simulation
Interest rate derivatives
Wheather derivatives, energy derivatives, credit risk derivatives
Application of financial derivatives: hedging of nonfinancial institutions
Application of financial derivatives: hedging and replication in financial institutions
Conditions for subject completion
Occurrence in study plans
Occurrence in special blocks
Assessment of instruction
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