Options

Brief description

American options, payoff functions for European calls and puts, pay off diagrams of simple option strategies, binomial trees as a graphical representation of the underlying stochastic process, arbitrage free valuation of European call options on the binomial tree, stochastic differential equation and geometric Brownian motion, Black-Scholes formula, put-call parity, the Greeks, building delta neutral and gamma neutral positions, valuation of options on shares and dividends payment, on equity indices, on forwards, on interest rates, on bonds and swaps, types of exotic options

Mode of delivery

face to face

Type

compulsory

Recommended or required reading and other learning resources/tools

Arnd Wiedemann (2007): Financial Engineering-Bewertung von Finanzinstrumenten, Bankakdemie Verlag,
Frankfurt am Main, 4th edition
John Hull: (2005): Options, Futures und andere Derivate, Pearson, München, 6th edition

Planned learning activities and teaching methods

IIntegrated class (in 2 groups): lectures, discussion, practical examples and exercises in small groups

Assessment methods and criteria

Continuous assessment 30%
Written final examination 70%

Prerequisites and co-requisites

Financial Mathematics, Descriptive and Inferential Statistics, Fixed Income, Equity and Portfolio Selection

Infos

Degree programme

Banking and Finance (Bachelor)

Cycle

Bachelor

ECTS Credits

3.00

Language of instruction

German

Curriculum

Full-Time

Academic year

2023

Semester

3 WS

Incoming

Yes

Learning outcome

After the successful completion of this course the students will be able to explain the numerous types of options traded on financial markets as well as the main organizational and institutional features of options exchanges.
The students will have the know-how to describe the profit and loss profiles of simple options and will be able to apply basic principles and formulas for the valuation of simple options.
After the successful completion of the course the students will be able to interpret the relevant ratios and to manage a portfolio by means of options.

Course code

0229-19-01-VZ-DE-28