Sercovic

Course Notes Outline
1 Financial derivatives as tool for protecting volatile underlying assets
2 Stochastic differential calculus, Itˉo’s lemma, Itˉo’s integral
3 Pricing European type of options - Black–Scholes model
4 Explicit and implicit schemes for pricing European type of options
5 Sensitivity analysis – dependence of the option price on parameters
6 Path dependent exotic options – Asian and barrier options
7 Pricing American type options – free boundary problems and numerical methods
8 Nonlinear extensions of the Black-Scholes theory and numerical approximation
9 Modeling of stochastic interest rates and interest rate derivatives
10 Appendix: Fokker–Planck equation and multidimensional Itˉo’s lemma

Lectures by D. ˇSevˇcoviˇc, Comenius University