QUANTITATIVE METHODS AND MODELS FOR FINANCIAL CHOICES

The fundamental aim of the course is to present the theory of derivatives to manage finacial and, in particular, currency risks, with special regard to their properties and evaluation techniques in discrete and continuous time, and the mechanics of financial markets (borse e mercati over-the-counter).

1. Theoretical knowledge: by the end of the course, students will be able to:
- acquire the basic vocabulary needed to allow students to engage with theoretical and practical problems related to the valuation of financial derivatives,
- understand essential literature on financial derivatives and markets,
- define the fundamental features of financial derivatives (forwards/futures, swaps and options) and their markets,
- appreciate the importance of financial derivatives as hedging tools.

2. Theoretical, applied, and methodological skills and comptences: by the end of the course, students will be able to:
- identify the relevant aspects of a problem or specific risk to hedge,
- organize and integrate data and information needed to find a solution,
- compare models and financial tools discussed during the course,
- solve evaluation problems,
- detect arbitrage opportunities.

3. Judgement and decision making skills: by the end of the course, students are expected to be able to:
- choose models and tools most suited to hedge a specific risk,
- apply the method which is more aligned to the problem under study,
- assess the applicability of a particular trading strategy.

4. Communication skills:
- present in writing analyses and results of pratical and theoretical problems and solution to exercises,
- use the students' forum (on moodle.unive.it) to discuss further problems and exercises.

5. Learning capability: the student is expected to:
- study the book indicated in the references and possibly to read the assigned chapters before classes,
- take notes,
- solve further exercises available at the end of each chapter of the book.

The knowledge of the contents of Financial mathematics or Mathematics for economics and finance is an essential prerequisite in order to understand the topics discussed during the course.

1. An introduction to financial derivatives
2. Mechanics of derivatives markets
3. Forwards and futures
4. Swaps
5. Asset price and exchange rate dynamics
6. Financial options: properties and valuation
7. Hedging risk with derivatives

J. Hull "Options, futures, and other derivatives", Pearson-Prentice Hall, New Jersey (11th ed.)

Further readings, exercises and slides are available on-line at moodle.unive.it

Written examination (duration 1 h 30), with two exercises of similar type with respect to those solved in class, aiming at verifying the skills descrebd above, and a theoretical question. The solution of the exercises will entail all the logic and theoretical discussions which lead to the results. The open question is about a topic discussed during the course in order to verify the knowledge of the mechanics of the market for a particular derivative contract.

Conventional. Students are asked to download and print the slides of the course on which they can take lecture notes. Examples and exercises will be discussed and solved during classes.

English

More information and further material on moodle.unive.it

written

This subject deals with topics related to the macro-area "Human capital, health, education" and contributes to the achievement of one or more goals of U. N. Agenda for Sustainable Development