This course provides an in-depth analysis of option valuation, trading strategies for options, and risk management of option positions. The models may include Black-Scholes, binomial and risk-neutral Monte Carlo pricing. Specific topics may include no-arbitrage relations; delta, kappa and gamma hedging; implied volatilities; option trading strategies; options on indices, futures and currencies; exotic options; and portfolio insurance. The goals of the course are to become proficient in option calculations and the implementation of option trading strategies, and to appreciate the pros and cons of the most widely used option-pricing models. By its very nature the course requires a reasonable degree of proficiency in mathematics and statistics. Prerequisite: Finance Theory and Practice.
