ASSET PRICING
Syllabus
Updated A.Y. 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
- Brownian Motion
- Diffusions
- Ito’s Lemma,
- Stochastic Differential Equations
Part 2: Asset Pricing Theory
- Basic Facts
- Consumption based model
- contingent claim market
- discount factor
- arbitrages
Part 3: Pricing by arbitrage
- Option pricing in discrete time
- The Black Scholes Model
- Delta Hedging
- Options on stock indices and currencies
- 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)
Updated A.Y. 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
- Brownian Motion
- Diffusions
- Ito’s Lemma,
- Stochastic Differential Equations
Part 2: Asset Pricing Theory
- Basic Facts
- Consumption based model
- contingent claim market
- discount factor
- arbitrages
Part 3: Pricing by arbitrage
- Option pricing in discrete time
- The Black Scholes Model
- Delta Hedging
- Options on stock indices and currencies
- 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)
Updated A.Y. 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
- Brownian Motion
- Diffusions
- Ito’s Lemma,
- Stochastic Differential Equations
Part 2: Asset Pricing Theory
- Basic Facts
- Consumption based model
- contingent claim market
- discount factor
- arbitrages
Part 3: Pricing by arbitrage
- Option pricing in discrete time
- The Black Scholes Model
- Delta Hedging
- Options on stock indices and currencies
- 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)
Updated A.Y. 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
Brownian Motion
Diffusions
Ito’s Lemma,
Stochastic Differential Equations
Part 2: Asset Pricing Theory
Basic Facts
Consumption based model
contingent claim market
discount factor
arbitrages
Part 3: Pricing by arbitrage
Option pricing in discrete time
The Black Scholes Model
Delta Hedging
Options on stock indices and currencies
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)
Updated A.Y. 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
- Brownian Motion
- Diffusions
- Ito’s Lemma,
- Stochastic Differential Equations
Part 2: Asset Pricing Theory
- Basic Facts
- Consumption based model
- contingent claim market
- discount factor
- arbitrages
Part 3: Pricing by arbitrage
- Option pricing in discrete time
- The Black Scholes Model
- Delta Hedging
- Options on stock indices and currencies
- 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)
Updated A.Y. 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
Brownian Motion
Diffusions
Ito’s Lemma,
Stochastic Differential Equations
Part 2: Asset Pricing Theory
Basic Facts
Consumption based model
contingent claim market
discount factor
arbitrages
Part 3: Pricing by arbitrage
Option pricing in discrete time
The Black Scholes Model
Delta Hedging
Options on stock indices and currencies
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)
Updated A.Y. 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)
Updated A.Y. 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)
Updated A.Y. 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)
Updated A.Y. 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)
Updated A.Y. 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%)
Updated A.Y. 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%)