DERIVATIVES

This course is on derivative pricing and hedging. The focus will be on equity and foreign exchange options. The course will be based on the following book: Options, Futures and other Derivatives, seventh edition, by John Hull (Pearson, Prentice Hall) The book of John Hull is a standard work in derivatives pricing and used on a lot of trading floors around the world. It has a very good mixture of theory and practice of option pricing. The book comes with a number of instruments that can help you during the course, which are described in the Preface of the book. The slides can be downloaded from the website of the author: www.rotman.utoronto.ca/~hull The book has two sets of end of chapter exercises: -Questions and Problems, which are quite easy and will help you to see whether you understood the main issues of a chapter. Solutions to these exercises can be found in the Solutions Manual. -Assignment Questions, which are harder, but useful to get a better grip on the theory. Each week a number of other exercises will be given as homework, to be handed in the next week. The exercises will be published on the web site and will be corrected within the next week by the Teaching Assistant Xiaoyu Shen (X.shen@vu.nl). He will also give TA sessions in which exercises will be discussed. These exercises can be done in groups of two students and will count for 10% of your final result. The other 90% comes from the final sit-in exam. To be successful at the exam, it is important that you do a large number of exercises. For some exercises you might have to use Mathlab or Excel. Not all exercises are available yet, but they will appear on the website in time, where also the course schedule will be updated. The course will take place on Fridays, 9:00-12:00, (with one exception) and also during class some exercises might be done. Week 1 - November 9: Chapters 2, 3, 5 Homework Exercises: 1,2,3 and 4. Week 2 - November 16: (Read before class Chapters 4, 8 and 10) Chapters 9 and 11 Homework Exercises: 5,6,7 and 8. Week 3 - November 23: Chapters 12 and 13 Homework Exercises: 9,10 and 11 Week 4 – November 29: Chapters 15 and 16 Homework Exercises: Week 5 - December 7: Chapters 17, 18 and 19 Homework Exercises: Week 6 - December 14: Chapters 27, 24 and 26 Homework Exercises: Week 7 - December 21: Chapters 33 and 34

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