Fundamentals of stock options. Lower and upper bounds for option prices, put-call parity.
Operational strategies through options.
Binomial trees: hedging strategy and risk neutral evaluation.
Pricing of American options.
The Cox-Ross-Rubinstein formulas for options.
Continuous time models: Brownian motion, geometric Brownian motion, Black & Scholes Model.
Ito's Lemma. Pricing of derivatives: Black & Scholes PDE and risk neutral valuation.
Black & Scholes pricing formulas. Volatility estimation. Delta-hedging.
Introduction to credit risk model: single bankruptcy unit and constant default intensity.
Pricing of Defaultable Zero Coupon Bonds (DZCB) and Credit Default Swaps (CDS).
