- Continuous-time stochastic processes and stochastic calculus.
- "No arbitrage" pricing and hedging of options. Martingale measures and the fundamental theorems of asset pricing.
- Interest rate modelling:
- The HJM-framework.
- 1-factor (affine) short rate models; their estimation and calibration.
- Change of numeraire and derivative pricing.
- Multi-factor models (along
- Beyond Black-Scholes. The exact topics will depend in the interest
of the participants and the lecturer. It could be something like
- Model extensions: Stochastic volatility, jumps and so-called generalized
affine models (not
unlike this one would imagine).
- Contract extensions: Barrier options, symmetry and static hedging.
- Model risk, volatility misspecification and the "the fundamental theorem
of derivative trading".