- Code FINM3007
- Unit Value 6 units
- Offered by Rsch Sch of Finance, Actuarial Studies & App Stats
- ANU College ANU College of Business and Economics
- Course subject Financial Management
- Areas of interest Finance
- Academic career UGRD
- Mode of delivery In Person
Second Semester 2019
See Future Offerings
This is an advanced course in derivatives pricing and hedging, and their applications. The aim is to cover topics such as: advanced features of the Black-Scholes model, including exotic options and derivatives dependent on the same Brownian motion; some bivariate/multivariate theory (normal distribution, Brownian motion in 2 dimensions), as needed for pricing options on correlated assets; Rubinstein's binomial pyramid for approximating a bivariate GBM; change of numeraire and equivalent martingale measures; optimal stopping theory as needed for American option pricing; hedging concepts in this context; alternatives to Black-Scholes models; local volatility models, jump diffusion and GARCH models. There will be an emphasis on early exercise options, and some time will be spent on the mathematical/stochastic foundations necessary for understanding these and other applications. Some Value-at-Risk concepts may be introduced, and applied to portfolios containing derivatives. Credit derivatives may also be discussed.
Upon successful completion, students will have the knowledge and skills to:Upon successful completion of the requirements for this course, students will be able to:
- Use Brownian motion, martingales and Itô’s formula.
- Use alternatives to Black-Scholes models such as local volatility, jump diffusion and GARCH models.
- Apply the arbitrage-free approach to the pricing of options, including exotic options, using the basic mathematical tools required, and understand how these options are used in financial practice.
- Value options on correlated assets, including the mathematical/stochastic foundations necessary.
- Understand the theory and use of early exercise options, including the use of optimal stopping theory.
See the course outline on the College courses page. Outlines are uploaded as they become available.
Typical assessment may include, but is not restricted to: assignments and a final exam.
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Students are expected to commit at least 10 hours per week to completing the work in this course. This will include at least 3 contact hours per week and up to 7 hours of private study time.
Requisite and Incompatibility
Tuition fees are for the academic year indicated at the top of the page.
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- Student Contribution Band:
- Unit value:
- 6 units
If you are an undergraduate student and have been offered a Commonwealth supported place, your fees are set by the Australian Government for each course. At ANU 1 EFTSL is 48 units (normally 8 x 6-unit courses). You can find your student contribution amount for each course at Fees. Where there is a unit range displayed for this course, not all unit options below may be available.
Offerings and Dates
|Class number||Class start date||Last day to enrol||Census date||Class end date||Mode Of Delivery||Class Summary|
|7690||22 Jul 2019||29 Jul 2019||31 Aug 2019||25 Oct 2019||In Person||N/A|