Asset pricing Course Notes1
ECG 528 Asset Pricing
Lecture 1
Prof. Antje Berndt
Fall 2013
1 / 27
Overview
Today
• Course overview
• Introduction to Derivatives Securities
Buzzwords: Derivatives; Forwards; Futures; Options; Traders;
Hedge funds
Readings: Chapter 1 in Hull
Practice problems: 1.1-1.10
Next time
• Futures, Hedging using futures
2 / 27
Course Overview
• The syllabus, posted on the class website, describes the policies and
the procedures for this course. Please read it carefully.
Course requirements
• Class participation (max of 2 unexcused absences, 5% of grade)
• Homework (4 assignments in groups of 1-3 students, 40% of grade)
• Midterm exam (October 15, in class, 20% of grade)
• Final exam (December 12, 1-4pm, 35% of grade)
How to reach me?
• O ce hours in Nelson 4124:
Tuesdays and Thursdays 3-4pm, or by appointment
3 / 27
Tentative Course Outline (Part 1)
Wk
Date
Topic
1
2
8/22
8/27
8/29
9/3
9/5
9/10
9/12
9/17
9/19
9/24
9/26
10/1
10/3
10/8
Introduction
Futures markets, Hedging using futures
Interest rates
Curve fitting
Pricing of forwards and futures
Interest rate futures
Swaps
Introduction to options markets
Properties of options
Trading strategie involving options
Introduction to binomial trees
From discrete to continuous time
Black-Scholes-Merton model
Review, preparation for midterm
3
4
5
6
7
8
Text
(Ch)
1
2,3
4
LN
5
6
7
9
10
11
12
13
14
Due
@1:30pm
HW1
HW2
4 / 27
Tentative Course Outline (Part 2)
Wk
Date
Topic
9
10/15
10/17
10/22
10/24
10/29
10/31
11/5
11/7
11/12
11/14
11/19
11/21
11/26
12/3
12/5
In-class midterm on Tuesday, October 15
The Greeks
Volatility smile and skew
Other approaches to derivatives valuation
Value at risk
Interest-rate derivatives: Std mkt models
Short-rate models
Swaps revisited
Credit risk and credit derivatives
Reduced-form credit risk models
Structural credit risk models
CDS
Lecture 1
Prof. Antje Berndt
Fall 2013
1 / 27
Overview
Today
• Course overview
• Introduction to Derivatives Securities
Buzzwords: Derivatives; Forwards; Futures; Options; Traders;
Hedge funds
Readings: Chapter 1 in Hull
Practice problems: 1.1-1.10
Next time
• Futures, Hedging using futures
2 / 27
Course Overview
• The syllabus, posted on the class website, describes the policies and
the procedures for this course. Please read it carefully.
Course requirements
• Class participation (max of 2 unexcused absences, 5% of grade)
• Homework (4 assignments in groups of 1-3 students, 40% of grade)
• Midterm exam (October 15, in class, 20% of grade)
• Final exam (December 12, 1-4pm, 35% of grade)
How to reach me?
• O ce hours in Nelson 4124:
Tuesdays and Thursdays 3-4pm, or by appointment
3 / 27
Tentative Course Outline (Part 1)
Wk
Date
Topic
1
2
8/22
8/27
8/29
9/3
9/5
9/10
9/12
9/17
9/19
9/24
9/26
10/1
10/3
10/8
Introduction
Futures markets, Hedging using futures
Interest rates
Curve fitting
Pricing of forwards and futures
Interest rate futures
Swaps
Introduction to options markets
Properties of options
Trading strategie involving options
Introduction to binomial trees
From discrete to continuous time
Black-Scholes-Merton model
Review, preparation for midterm
3
4
5
6
7
8
Text
(Ch)
1
2,3
4
LN
5
6
7
9
10
11
12
13
14
Due
@1:30pm
HW1
HW2
4 / 27
Tentative Course Outline (Part 2)
Wk
Date
Topic
9
10/15
10/17
10/22
10/24
10/29
10/31
11/5
11/7
11/12
11/14
11/19
11/21
11/26
12/3
12/5
In-class midterm on Tuesday, October 15
The Greeks
Volatility smile and skew
Other approaches to derivatives valuation
Value at risk
Interest-rate derivatives: Std mkt models
Short-rate models
Swaps revisited
Credit risk and credit derivatives
Reduced-form credit risk models
Structural credit risk models
CDS