Option Area(s):

Finance (Corporate Track)
Finance (Investment Track)

Course Description :

This course provides an introduction to derivative securities. Although the subject is inherently quantitative, the class will emphasize the intuition underlying the pricing of derivatives, rather than technical details and the state-of-the-art techniques. To develop the intuition, a significant portion of the class will cover binomial pricing techniques. This will allow coverage of the Black-Scholes model to focus on the economics, rather than the mathematics. Upon completion of the class, a student should understand the idea of arbitrage pricing, be able to use the binomial and Black-Scholes models for pricing and hedging, and understand the role of derivative securities in the context of other applications (e.g., risk management, real options, and executive compensation).

Projects / Events :

Each week, the lectures, class discussion, reading material, and homework assignments will address a specific topic.

Prerequisites :

MGMT 61000 and 61100.