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Mini-course «Discrete Time Models in Option Pricing»

From 02 September to 05 September professor of the University of Bologna Andrea Pascucci delivered a mini-course «Discrete-time models in option pricing» 

Course description

The course discussed discrete-time models in option pricing. During the course the basic concepts of probability theory were reviewed. The main discrete market models for European options and the basic financial market investment strategies were presented. Special attention was paid to the topics regarding pricing and hedging algorithms. In addition, the binomial model for American and European options, as well as Black-Scholes model, were discussed.

 

Lectures 1-2. Basic concepts of probability. Discrete market models for European options.

Lectures 3-4. Self-financing and predictable strategies. Pricing in an arbitrage-free market: Equivalent martingale measure, Hedging strategies.

Lectures 5-6. Calibration, Binomial model and Black-Scholes formula. American options. Risk neutral and arbitrage prices.

Lectures 7-8. Optimal exercise strategies. American and European options in the binomial model: pricing and hedging algorithms. Free-boundary problem for American options.