Over the last decades, companies and investors have been increasingly challenged by risks due to unpredictable movements in stock prices, commodity prices, exchange rates, and interest rates. Financial markets have responded to this increase in volatility by developing a wide range of financial instruments known as derivatives, as well as strategies combining these products with traditional financial securities like stocks and bonds. As a result, derivatives markets have rapidly increased in volume and size and have become one of the most exciting areas in finance. However, the global financial crisis in 2007-2008 has made clear that derivatives can also create new risks when their design and limitations are poorly understood by market participants.
This goal of this course is to help students navigating the complex and esoteric world of derivatives. It covers the essentials of key derivatives instruments, such as forwards, futures, swaps, and options. You will learn how these products work, how they are used for hedging and speculation, how they are priced using fundamental no-arbitrage principles, and how to exploit any mispricing using arbitrage strategies. You will apply this theoretical knowledge to solve practical assignments and case studies. The course fosters a deep analytical and conceptual understanding of derivatives and enhances your problem-solving skills.