154-0540/02 – Valuation and Hedging of Financial Derivatives (VHFD)

Gurantor departmentDepartment of FinanceCredits3
Subject guarantorprof. Ing. Tomáš Tichý, Ph.D.Subject version guarantorprof. Ing. Tomáš Tichý, Ph.D.
Study levelundergraduate or graduateRequirementChoice-compulsory type B
Year2Semesterwinter
Study languageEnglish
Year of introduction2019/2020Year of cancellation
Intended for the facultiesEKFIntended for study typesFollow-up Master
Instruction secured by
LoginNameTuitorTeacher giving lectures
CUL33 doc. Ing. Miroslav Čulík, Ph.D.
TIC02 prof. Ing. Tomáš Tichý, Ph.D.
Extent of instruction for forms of study
Form of studyWay of compl.Extent
Full-time Examination 2+0

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 nonstandard 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.

Way of continuous check of knowledge in the course of semester

E-learning

Other requirements

There are no additional requirements on any student

Prerequisities

Subject has no prerequisities.

Co-requisities

Subject has no co-requisities.

Subject syllabus:

1. Introduction (financial markets, financial derivatives, valuation approaches, models and software). 2. Nonlinear financial derivatives (forwads, futures, swaps). 3. Linear financial derivatives (vanilla options, exotic options, real options). 4. Stochastic processes (klassification, models, usage). 5. Black-Scholes-Merton (assumptions, derivatives, application). 6. Continuous models II (underlying, payoff, processes). 7. Numerical approximation (lattices, PDE, AI). 8. Simulation Monte Carlo (simulation, error, applications). 9. Interest rates and derivatives (classification, models, appication, credit risk). 10. Exotic derivatives (commodities, weather, energy). 11. Non-financial institutions (assumptions, risk, usage). 12. Financial institutions (assumptions, risk, usage).

Conditions for subject completion

Full-time form (validity from: 2019/2020 Winter semester)
Task nameType of taskMax. number of points
(act. for subtasks)
Min. number of pointsMax. počet pokusů
Examination Examination 100  51 3
Mandatory attendence participation: Attendance is not compulsory.

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Conditions for subject completion and attendance at the exercises within ISP: Attendance is not compulsory. Any student, even within ISP, must fulfill standard conditions.

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Occurrence in study plans

Academic yearProgrammeBranch/spec.Spec.ZaměřeníFormStudy language Tut. centreYearWSType of duty
2024/2025 (N0412A050005) Finance P English Ostrava 2 Choice-compulsory type B study plan
2024/2025 (N0488A050004) Finance and Accounting (S01) Finance P Czech Ostrava 2 Choice-compulsory type B study plan
2023/2024 (N0488A050004) Finance and Accounting (S01) Finance P Czech Ostrava 2 Choice-compulsory type B study plan
2023/2024 (N0412A050005) Finance P English Ostrava 2 Choice-compulsory type B study plan
2022/2023 (N0412A050005) Finance P English Ostrava 2 Choice-compulsory type B study plan
2021/2022 (N0412A050005) Finance P English Ostrava 2 Choice-compulsory type B study plan
2020/2021 (N0412A050005) Finance P English Ostrava 2 Choice-compulsory type B study plan
2019/2020 (N0412A050005) Finance P English Ostrava 2 Choice-compulsory type B study plan

Occurrence in special blocks

Block nameAcademic yearForm of studyStudy language YearWSType of blockBlock owner

Assessment of instruction

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