The course introduces students to one of the most important and most technically challenging areas in finance: derivative securities. Derivative securities include options, futures, forward contracts and swaps. This course examines corporate risk management techniques and how derivatives can be used to manage risk. This course will also cover institutional characteristics of derivatives exchanges, OTC markets and market clearing mechanisms. Finally, we will examine the pricing of derivatives and their use to build trading strategies and structured products. In accordance with the role that financial intermediaries also have in promoting the transition to a socially sustainable business model, a lesson will be devoted to the guidelines that can help identify whether a product constructed as a combination of derivatives can be considered ESG.
The goal of the course is to provide students with a complete overview of the main derivatives contracts, describing valuation issues and potential uses.
FORWARDS AND FUTURES CONTRACTS: How to use Forward and Future contracts. Pricing of forward and future contracts. Calculation of the market value of forwards. Hedging strategies with Forwards and Futures. Trading strategies with futures. Forward exchange rates.
SWAPS: How to use Swaps contracts. Pricing and valuation of interest rate swaps an currency swaps.
OPTIONS: Options uses and main typologies. Valuation models: binomial and Black-Scholes. Sensitivity coefficients (greeks) and their use in directional and volatility trading strategies.
STRUCTURED PRODUCTS as combination of derivatives: typologies and characteristics. ESG structured products
Traditional lectures where students will be constantly encouraged to raise questions and new topics for discussion.
Cases discussion and simulations will complete the course.
Final written exam closed books mainly based on the solution of numerical exercises.