A Student Guide for the Course
“Analytical Finance II”, 7.5 points
Course code: MMA708 Language: English
Level D Examination: Project - 6 points, Seminars –1.5 points
Educational Program: Analytical Finance/ Teacher: Jan Röman
Financial Engineering
11N
/12Time/Place
/ Lecture131 / 14Mo, 6/11
1518:15-21:00 / Introduction: Forward Rate Agreements, Futures and other Fixed-Income instruments.
2 / 16We, 8/11
1718:15-21:00 / Bootstrapping and Interpolation
3 / 18Mo, 13/11
1918:15-21:00 / Nelson Siegel model, Risk measures, Duration and Convexity
4 / 20We, 15/11
2118:15-21:00 / Something about DVA & CVA, Option Adjusted Spread.
5 / 22Mo, 20/11
2318:15-21:00 / Pricing theory and Stochastic processes of interest rates.
6 / 24We, 22/11
2518:15-21:00 / Pricing theory and Stochastic processes of interest rates.
Models for the short rate. Martingale measures
7 / 26Mo, 27/11
2718:15-21:00 / Models for the short rate. Martingale measures.
8 / 28We, 29/11
2918:15-21:00 / Affine term structure. Vasicek, Ho-Lee.
9 / 30Mo, 4/12
3118:15-21:00 / Short Rate models and Affine term structure. CIR, and Hull-White.
The Heath Jarrow Morton Framework
10 / 32We, 6/12
3318:15-21:00 / Forward Measures and Option Pricing.
11 / 34Mo, 11/12
3517:15-21:00 / Forward Measures and Option Pricing.
Interest rate derivatives.
12 / 36We, 13/12
3717:15-21:00 / Black model
13 / 38Mo, 18/12
3917:15-21:00 / Numerical methods. Trees.
14 / 40We, 20/12
4117:15-21:00 / Seminar
T / 42Mo, 8/1
4314:10-19:30 / Written Exam Analytical Finance II
REMEMBER TO SIGN UP FOR THE WRITTEN EXAM!!!
REMARK! This is preliminary.
Literature
Analytical Finance: Volume II
The Mathematics of Interest Rate Derivatives, Markets, Risk and Valuation
By:Jan R. M. Roman (and documents from
Glossary in finance by Jan Röman
Download the documents below from
The Glossary is found at:
Reference literature
Hull, John C. Option, Futures andOther Derivatives
Course content
Products and Markets: Fix income instruments of different kinds. Interest rates and yields of different kinds.Derivatives: Interest rate derivatives and credit derivatives. Trading: Construction of synthetic contracts and trading strategies. Costs: Carry Cost, Margin Requirements and Collaterals. Binomial models of Interest Rates: Binomial and Trinomial Trees. Random behaviour of interest rates: Drift, volatility, and Wiener processes. Stochastic processes of interest rates: Processes of short rate, forward rate and bond prices. The partial differential equation for the termstructure of interest rates. The Black model for interest rates options: The Risk measures in the interest rate market. Delta for yield and price, gamma for yield and price, theta, vega and rho. Duration, modified duration, convexity and there effective values.Numerical methods for interest rate instruments. Interest rates in the new era. CVA and DVA
Seminar
There will be one seminar in the end of the course. It is supposed that the topics of reports will be chosen in the first weeks and presented at a seminar where working groups of students will prepare reports. All students in the group should actively take part in the preparation of the reports and their presentations. The teacher should receive the written report one week before the seminar.
Marks
Totally, you can have 50 points on the written exam.
To pass and be given G (C) you need 20 points.
To get VG (B) you need 30 points.
To get VG (A) you need 40 points.