550.444 
MODELING AND ANALYSIS OF
SECURITIES AND FINANCIAL MARKETS:

SPRING 2008

[News] [Notes] [Assignments]

Instructors:
Office Hours:
    TBA
Lectures:
    Tuesday & Thursday: 9-10:15am, Shriver 104
Teaching Assistant:
    Robert Panariello
  • Section: Tuesday 3-3:50, Whithead 304
  • Office Hours
    • Monday 12-1
    • Wednesday 4:30 - 5:30
Textbook:
Description:
    Advances in corporate finance, investment practice and the capital markets have been driven by the development of a mathematically rigorous theory for financial instruments and the markets in which they trade.

    This course will develop the mathematical concepts and techniques for modeling cash instruments and their hybrids and derivatives. This includes equity (stocks) and fixed income (bonds) instruments as well as options, futures and other derivatives. In addition, the analytical complexities associated with market behavior and risks are addressed in the context of investment practice and hedging. A quantitative development of the term structure of interest rates and its fundamental relationship to assessing relative value is another core component of this course.

    • Cash Instruments: Equity (e.g., stock); Fixed Income (e.g., bonds, deposits, discount bills, the credit hierarchy); Money (including foreign exchange, FX); other Assets, Indexes, & Commodities

    • Hybrids and Derivatives: Forward & Futures Contracts, Exchangeable / Convertible instruments (debt for equity, preferred for common, etc.), Exchange Trades Funds and Index instruments, Swap Contracts (interest rate, credit default, total return/equity), Asset Backed Instruments (e.g., Mortgage Backed Securities, MBS), and Options (an everything, including external (on a stock or commodity, for example) or internal (as in prepayments in a MBS or call option in a bond) options), including option strategies (spreads, collars, caps/floors, etc.)

    • Modeling and Analysis issues related to conventions and practices such as settlement, delivery, accruals, exercise, conversion, notification, corporate actions, short selling, margin and leverage, financing and repo, carry, the cash and carry trade, rolls, the basis, put-call parity, etc.

    • The Term Structure of Interest Rates: including forward rates, the forward rate curves, term premium, the swap curve, LIBOR curve, and credit curves.

    • Principles of static, discrete and continuous models. The relation between periodic compounding and continuous compounding and how it relates to modeling approaches.

    • The Markets and Exchanges: where instruments are created and traded, whether they have an exchange or are over the counter (OTC), do they trade electronically or “by appointment”.
ANNOUNCEMENTS:


Slides:

Reference Materials

Assignments: