Over the last decades, companies and investors have been increasingly challenged by risks due to unpredictable movements in stock 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 new products with traditional financial securities like stocks and bonds. As a result, derivatives markets have greatly increased in volume and complexity. However, the global financial crisis has made clear that derivatives can also create new risks when their limitations are poorly understood.
This course covers the essentials of key derivatives instruments, such as forwards, futures, and options. You will learn how these products work, how they are used for hedging and speculation, how they are priced, and how to exploit any mispricing using arbitrage strategies. You will apply this theoretical knowledge to solve practical assignments and case studies.