Valuation of Derivatives
Please note that this course will be revised before it is offered again.
This course covers the valuation of derivatives within a complete markets model, using preference restrictions. It is based on several chapters from Poon and Stapleton, Asset
pricing in discrete time: a complete markets approach.
1. The complete markets model: Valuation of options
Reading: Poon and Stapleton, ch 3, Option Pricing in a single-period model.
Huang and Litzenberger, ch 6, Valuation of Complex Securities and Options with
Cochrane, ch 3, Option Pricing
2. Utility theory and the pricing kernel
Poon and Stapleton, ch 2
Eekhoudt, Gollier and Schlesinger, Economic and Financial Decisions Under Risk,
Princeton UP, 2005
3. Extensions to Black-Scholes
Poon and Stapleton, ch 4, Valuation of contingent claims: extensions
Cochrane, ch 18, Option Pricing without perfect replication
4. Conditions for the Black model and the pricing of Interest-Rate Options
Franke, Huang and Stapleton, `A two-dimensional risk-neutral valuation relationship
for the valuation of options' Review of Derivatives Research, (2007)
5. Futures prices in the multi-period model
Poon and Stapleton, ch 5, 6
Cox, Ingersoll and Ross, `The relationship between forward and futures prices', JFE
This is an excerpt from the complete course description for the course. If you are an active student at BI, you can find the complete course descriptions with information on eg. learning goals, learning process, curriculum and exam at portal.bi.no. We reserve the right to make changes to this description.