IM61013: Financial Engineering

IM61013
Course name	Financial Engineering
Offered by	Industrial & Systems Engineering
Credits	3
L-T-P	3-0-0
Previous Year Grade Distribution
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Semester	Autumn

Syllabus

Syllabus mentioned in ERP

The Black-Scholes Equation – Background, Definitions, Hedging strategies, Brownian Motion, Geometric Brownian motion with drift, Itos Lemma, The BlackScholes Analysis, Hedging in Continuous Time, The option price. Monte Carlo Methods - Monte Carlo Error Estimators, The Box-Muller Algorithm, Low Discrepancy Sequences, Correlated Random Numbers, The Brownian Bridge The Binomial Model, No-arbitrage Lattice Derivative Contracts on non-traded Assets and Real Options - Derivative Contracts, A Forward Contract, Convenience Yield. Discrete Hedging - Delta Hedging, Gamma Hedging, Vega Hedging Jump Diffusion - The Poisson Process, The Jump Diffusion Pricing Equation Mean Variance Portfolio Optimization - The Portfolio Allocation Problem, Adding a Risk-free asset, Individual Securities. Text

•Options, Futures, and Other Derivatives, J C Hull, Prentice Hall of India,Sixth Edition, 2007.

•Principles of Financial Engineering, S N Neftci, Academic Press, Elsevier,2004.

•An Introduction to Computational Finance without Agonizing Pain, Peter Forsyth 2005, www.scicom.uwaterloo.ca/paforsyt