1.  Introduction. (Reading: Song Chapter 1)

2.  Term structure of interest rate; Interest rate futures and swaps (Reading: Song Chapter 2; Hull Ch 4 &5)

3.  Capital Asset Pricing Model. (Reading: Song Chapter 3)

4.  APT model (Reading: Song Chapter 4)/Problem set review

5.  Midterm.

6.  IRS case study/Option pricing and dynamic hedging strategy. (Reading: Song Chapter 5)

7.  Black-Scholes model and Greeks. (Reading: Song Chapter 6, Chapter 10-section 4 & 5, Hull ch 11,12 & 13: Black-Scholes analysis; options on indices, currencies, futures)

8.  LOR case 1: Portfolio insurance

9.  Equivalent martingale and no-arbitrage theory: the Fundamental Theory. (Reading: Song Chapter 7)

10.  LOR case 2: the Supertrust

11.
Applications of the Fundamental theory I：Stochastic volatility. (Notes)

12.  Applications of the Fundamental theory II: Term Structure Model. (Notes)

13.  Case: LTCM

14.  Market microstructure: environment, trading methods and market efficiency. (Reading: Song Chapter 9)

15.  Review.