Facoltà di Economia

Aggiornato A.A. 2020-2021

Asset Pricing
M.Sc. Finance and Banking

Prof. Stefano Herzel

The course provides a basic knowledge of the theory of asset pricing, with an emphasis on the evaluation by arbitrage. Students will apply their knowledge to solve relevant problems in the field of asset pricing  and by implementing the theoretical models (often using Matlab) through homework assignments.

Upon completion of the course students will know and understand the following topics:

Part 1: Mathematical instruments

1. Brownian Motion
2. Diffusions
3. Ito’s Lemma,
4. Stochastic Differential Equations

Part 2: Asset Pricing Theory

1. Basic Facts
2. Consumption based model
3. contingent claim market
4. discount factor
5. arbitrages

Part 3: Pricing by arbitrage

1. Option pricing in discrete time
2. The Black Scholes Model
3. Delta Hedging
4. Options on stock indices and currencies
5. Implied volatility

Grade Assessment

The final grade will be determined by a final exam. Active participation to the lectures will be rewarded by bonus points.

Prerequisities
The courses of the first year (in particular Mathematics and Statistics).

Textbooks
J. H. Cochrane, “Asset Pricing”, Princeton University Press, 2005
J. Hull: ”Options, Futures, and other Derivatives”, Pearson,  (any edition is fine)

Aggiornato A.A. 2019-2020

Asset Pricing
M.Sc. Finance and Banking

Prof. Stefano Herzel

The course provides a basic knowledge of the theory of asset pricing, with an emphasis on the evaluation by arbitrage. Students will apply their knowledge to solve relevant problems in the field of asset pricing  and by implementing models on Matlab through weekly homework assignments.

Upon completion of the course students will know and understand the following topics:

Part 1: Mathematical instruments

1. Brownian Motion
2. Diffusions
3. Ito’s Lemma,
4. Stochastic Differential Equations

Part 2: Asset Pricing Theory

1. Basic Facts
2. Consumption based model
3. contingent claim market
4. discount factor
5. arbitrages

Part 3: Pricing by arbitrage

1. Option pricing in discrete time
2. The Black Scholes Model
3. Delta Hedging
4. Options on stock indices and currencies
5. Implied volatility

Grade Assessment

• Class Participation (20%)
• Homework (30%)
• Final Exam (50%)

Prerequisities
The courses of the first year (in particular Mathematics and Statistics)

Textbooks
J. H. Cochrane, “Asset Pricing”, Princeton University Press, 2005
J. Hull: ”Options, Futures, and other Derivatives”, Pearson,  (any edition is fine)

Aggiornato A.A. 2018-2019

Asset Pricing
M.Sc. Finance and Banking

Prof. Stefano Herzel

The course provides a basic knowledge of the theory of asset pricing, with an emphasis on the evaluation by arbitrage. Students will apply their knowledge to solve relevant problems in the field of asset pricing  and by implementing models on Matlab through weekly homework assignments.

Upon completion of the course students will know and understand the following topics:

Part 1: Mathematical instruments

1. Brownian Motion
2. Diffusions
3. Ito’s Lemma,
4. Stochastic Differential Equations

Part 2: Asset Pricing Theory

1. Basic Facts
2. Consumption based model
3. contingent claim market
4. discount factor
5. arbitrages

Part 3: Pricing by arbitrage

1. Option pricing in discrete time
2. The Black Scholes Model
3. Delta Hedging
4. Options on stock indices and currencies
5. Implied volatility

Grade Assessment

• Class Participation (20%)
• Homework (30%)
• Final Exam (50%)

Prerequisities
The courses of the first year (in particular Mathematics and Statistics)

Textbooks
J. H. Cochrane, “Asset Pricing”, Princeton University Press, 2005
J. Hull: ”Options, Futures, and other Derivatives”, Pearson,  (any edition is fine)

Aggiornato A.A. 2017-2018

Asset Pricing
M.Sc. Finance and Banking

Prof. Stefano Herzel

The course provides a basic knowledge of the theory of asset pricing, with an emphasis on the evaluation by arbitrage in discrete and continuous time models.

Upon completion of the course students will know and understand the following topics:

1. No Arbitrage: The Fundamental Theorem of Finance

2. Stochastic Discount Factor, Pricing Kernel and Equivalent Martingale Measure.

3. Option pricing in discrete time.

4. The Black Scholes model.

5. Hedging and pricing contingent claims.

6. Options on stock indices and currencies

7. Futures options

8. The Greek letters

9. Volatility Smiles

10. Monte Carlo simulation

11. Exotic Options

12. Interest Rate Derivatives: the standard market model

Students will apply their knowledge to solve relevant problems in the field of asset pricing  and by implementing models on Matlab through weekly homework assignments.

Grade Assessment

• Class Participation (20%)

• Homework (30%)

• Final Exam (50%)

Prerequisities

Math, Stats, and a basic knowledge of Matlab. The “Derivatives” course is useful (but not strictly necessary)

Textbooks

S.A. Ross: “Neoclassical Finance”, Princeton University Press, 2004

J. Hull: ”Options, Futures, and other Derivatives”, Pearson,  (any edition is fine)

 

Aggiornato A.A. 2016-2017

Asset Pricing
M.Sc. Finance and Banking
Fall 2016
Prof. Stefano Herzel

The course provides a basic knowledge of the theory of asset pricing, with an emphasis on the evaluation by arbitrage in discrete and continuous time models.

Upon completion of the course students will know and understand the following topics:

1. No Arbitrage: The Fundamental Theorem of Finance

2. Stochastic Discount Factor, Pricing Kernel and Equivalent Martingale Measure.

3. Option pricing in discrete time.

4. The Black Scholes model.

5. Hedging and pricing contingent claims.

6. Options on stock indices and currencies

7. Futures options

8. The Greek letters

9. Volatility Smiles

10. Monte Carlo simulation

11. Exotic Options

12. Interest Rate Derivatives: the standard market model

Students will apply their knowledge to solve relevant problems in the field of asset pricing  and by implementing models on Matlab through weekly homework assignments.

Grade Assessment

• Class Participation (10%)

• Homework (40%)

• Final Exam (50%)

Prerequisities

Math, Stats, and a basic knowledge of Matlab. The “Derivatives” course is useful (but not strictly necessary)

Textbooks

S.A. Ross: “Neoclassical Finance”, Princeton University Press, 2004

J. Hull: ”Options, Futures, and other Derivatives”, Pearson,  (any edition is fine)

 

Aggiornato A.A. 2014-2015

Asset Pricing
M.Sc. Finance and Banking
Fall 2014
Prof. Stefano Herzel

• Our main topic is financial derivatives
• We will study the pricing by arbitrage approach under different settings
• We will consider different derivatives and different models
• We will use Matlab to implement the models
• Our textbook is Hull:” Options, Futures, and other Derivatives” (any edition is fine)

Topics

• The Binomial  Model (Cox-Ross-Rubinstein)
• Wiener Processes and Ito’s Lemma
• The Black-Scholes-Merton Model
• Options on Stock Indexes
• Options on Currencies
• Options on Futures
• Dynamic Hedging
• Monte Carlo methods.
• Exotic Options
• Interest Rate Derivatives
• ... And more (depending on time and interests).

Grade Assessment
• Class Participation (20%)
• Homework (30%)
• Written Exam (50%)