This follow-up course to MS&E245A is ideal for those who want to deepen their understanding of investment topics, using an engineering perspective. Learn how to calculate prices for forwards, swaps, calls, puts and other major types of derivatives on commodities, stocks and other important asset classes. Explore the relationship between discrete and continuous time models and understand key tools for derivative analysis. Analyze the impact of derivatives on portfolio risk and develop hedging strategies. Use core strategies such as arbitrage pricing arguments to problem solve in new situations. Students will focus largely on practical applications rather than theoretical treatments.
- Derivatives markets
- Discounting and interest rates
- Asset price dynamics
- Binomical lattice models
- Stochastic calculus, Ito’s Lemma and the Black-Scholes equation
- Portfolio characteristics and risk
- Replicating portfolios
Note on Course Availability
This course is typically offered Spring quarter.
The course schedule is displayed for planning purposes – courses can be modified, changed, or cancelled. Course availability will be considered finalized on the first day of open enrollment. For quarterly enrollment dates, please refer to our graduate certificate homepage.
MS&E245A or equivalent.
Students should be comfortable with cash flows and using interest rates to calculate values of cash flows. A background in probability and statistics is helpful, along with multivariable differential and integral calculus. Understanding the capital asset pricing model (CAPM) and familiarity with software such as Excel, Matlab, R, SiPy will be helpful.