Credits: 3 (3-0-0)
Prerequisites: MSL708 for MBA, MSL302 for B. Tech students
Description
The course introduces forwards, futures, swaps, and options – how these markets function, how these securities are priced, and purposes for which they are used by hedgers and sp0eculators. It covers basic concepts in stochastic calculus, numerical procedures (including binomial trees, Monte Carlo simulation, and finite difference methods), value at risk measures, Credit risk derivatives (valuation and usage), martingales pricing theory, interest rate derivatives (such as bond options, caps and floors), equilibrium and no-arbitrage models of the short-term interest rate, and advanced models (Heath, Jarrow, and Morton model, and LIBOR market model), and real options.