- Level Professional
- Duration 16 hours
- Course by Columbia University
-
Offered by
About
This course discusses topics in derivative pricing. The first module is designed to understand the Black-Scholes model and utilize it to derive Greeks, which measures the sensitivity of option value to variables such as underlying asset price, volatility, and time to maturity. Greeks are important in risk management and hedging and often used to measure portfolio value change. Then we will analyze risk management of derivatives portfolios from two perspectives—Greeks approach and scenario analysis. The second module reveals how option’s theoretical price links to real market price—by implied volatility. We will discuss pricing by volatility surface as well as explanations of volatility smile and skew, which are common in real markets. The third module involves topics in credit derivatives and structured products and focuses on Credit Debit Obligation (CDO), which played an important part in the past financial crisis starting from 2007. We will cover CDO’s definition, simple and synthetic versions of CDO, and CDO portfolios. The final module is the application of option pricing methodologies and takes natural gas and electricity related options as an example to introduce valuation methods such as dynamic programming in real options.Modules
Course Overview
3
Readings
- Course Overview
- About Us
- Academic Honesty Policy
Review of the Binomial Model and the Black-Scholes Model
1
Assignment
- W2.1 Self-check Quiz
2
Videos
- Review of the Binomial Model for Option Pricing
- The Black-Scholes Model
1
Readings
- Lesson Supplements
The Greeks
2
Assignment
- W2.2 Self-Check Quiz
- Graded quiz
4
Videos
- The Greeks: Delta
- The Greeks: Gamma
- The Greeks: Vega
- The Greeks: Theta
Risk Management of Derivatives Portfolios and Delta-Hedging
2
Assignment
- W2.3 Self-Check Quiz
- W2.4 Self-Check Quiz
3
Videos
- Risk-Management of Derivatives Portfolios: Greeks Approach
- Risk-Management of Derivatives Portfolios: Scenario Analysis
- Delta-Hedging
The Volatility Surface
1
Assignment
- W2.5 Self-check
2
Videos
- Beyond Black-Scholes: Implied Volatility
- Beyond Black-Scholes: Volatility Surface
Review
1
Assignment
- Equity Derivatives in Practice: Part I
1
Readings
- Quiz Instructions
The Volatility Surface in Action and Skew
1
Assignment
- W3.1 Self-Check Quiz
3
Videos
- The Volatility Surface in Action
- Why is There a Skew?
- The Leverage Effect
1
Readings
- Lesson Supplements
The Volatility Surface and Pricing Derivatives
2
Assignment
- W3.2 Self-Check Quiz
- W3.3 Self-Check Quiz
7
Videos
- What the Volatility Surface Tells Us
- Deriving the Marginal Risk-Neutral Distribution Using Volatility Surface
- Pricing Derivatives Using the Volatility Surface
- Example: Digital Option Pricing
- Pricing a Range Accrual
- Beyond the Volatility Surface and Black-Scholes 1
- Beyond the Volatility Surface and Black-Scholes 2
Review
1
Assignment
- Graded quiz
Assignment
1
Assignment
- Assignment 1
1
Readings
- Introduction to Assignment
Assignment 2
1
Assignment
- Assignment 2
CDOs and the Gaussian Copula Model
1
Assignment
- W5.1 Self-Check Questions
3
Videos
- Structured Credit: CDOs and Beyond
- The Gaussian Copula Model
- Computing the Portfolio Loss Distribution
1
Readings
- Lesson Supplements
A Simple Example
2
Assignment
- W5.2 Self-Check Questions
- W5.3 Self-Check Questions
3
Videos
- 1-Period CDO Model: Part I
- 1-Period CDO Model: Part II
- Observations from the 1-Period CDO Model
Understanding a CDO Tranche
1
Assignment
- W5.4 Self-Check Quiz
4
Videos
- The Mechanics of a “Synthetic” CDO Tranche
- Fair Value of Premium & Default Leg
- Fair Value of CDO Tranche
- Cash and Synthetic CDOs
CDO Portfolios
4
Videos
- Pricing and Risk Management of CDO Portfolios
- Challenges in Risk Management of Structured Credit Portfolios
- A Brief Aside on Copulas
- CDO-Squared's and Beyond
Review
1
Assignment
- Credit Derivatives and Structured Products
1
Readings
- Quiz Instructions
Real Options
1
Videos
- Real Options
1
Readings
- Lesson Supplements
Energy and Commodities Modeling
3
Videos
- Valuation of Natural Gas and Electricity Related Options 1
- Valuation of Natural Gas and Electricity Related Options 2
- Real Options in Excel
Review
1
Assignment
- Other Applications of Financial Engineering
1
Readings
- Quiz Instructions
Auto Summary
"Advanced Topics in Derivative Pricing" is a professional-level course designed for individuals keen on mastering complex concepts in the field of Business & Management. Led by expert instructors from Coursera, this comprehensive program spans 960 hours and is available through a Starter subscription. The course is meticulously structured into four modules, beginning with an in-depth exploration of the Black-Scholes model to derive Greeks—key tools for assessing the sensitivity of option values to various market variables. These fundamentals are crucial for effective risk management and portfolio hedging. Building on this foundation, the second module delves into the relationship between theoretical and real market prices via implied volatility. Learners will gain insights into pricing through the volatility surface and understand phenomena like volatility smiles and skews. In the third module, the focus shifts to credit derivatives and structured products, particularly Credit Debit Obligations (CDOs). This segment provides a detailed examination of CDOs, including their definitions, variations, and their significant role in historical financial crises. The final module applies option pricing methodologies to real-world scenarios, using natural gas and electricity options as case studies. Through dynamic programming and other valuation methods, participants will learn practical approaches to real options. This course is ideal for professionals seeking advanced knowledge in derivative pricing, risk management, and financial modeling. Whether you're a seasoned finance expert or an ambitious learner aiming to deepen your expertise, this program offers valuable skills and insights to enhance your career in finance.

Garud Iyengar

Ali Hirsa
Martin Haugh