Module Catalogues, Xi'an Jiaotong-Liverpool University   
 
Module Code: MTH402
Module Title: Fixed Income Securities
Module Level: Level 4
Module Credits: 5.00
Academic Year: 2019/20
Semester: SEM2
Originating Department: Mathematical Sciences
Pre-requisites: N/A
   
Aims
We present three types of exotic options on a geometric Brownian motion and work out a detailed analysis of each type. We also present and analyze the main term-structure models that are commonly used in practice
Learning outcomes 
By the end of this module students should be able to


A. By the end of this module students should be able to understand, analyze, and implement the theory of exotic option pricing and the main term-structure models.

B. Understand, analyze and implement: Exotic options, binomial model for interest rates, fixed income derivatives, Change of Numeraire, forward measures, term structure models, yield curve models, Merton’s and Vasicek’s models, Heath-Jarrow-Morton model and the forward LIBOR model.


Method of teaching and learning 
Lectures and homework exercises
Syllabus 
1. Exotic Options


. The Feynman-Kac formula and its use in representing the price of an option


• Connection of the risk-neutral pricing problem to PDE and


Derivation and analysis of


• An Up-and–out barrier Call


• A look Back Call


• An Asian Call


• Other path-dependent options will be considered in the exercises


2. Interest rate Derivatives in the discrete case


• Interest Rate and Bond Derivatives


• Binomial Models for pricing a zero-coupon bond

• The Black-Derman-Toy Model (BDT)



3. Interest Rate Derivatives in The Continuous Case


• Finite-factor Markov models for the short rate


Change of Numeraire


• Heath-Jarrow-Morton model


• Forward LIBOR model


Delivery Hours  
Lectures Seminars Tutorials Lab/Prcaticals Fieldwork / Placement Other(Private study) Total
Hours/Semester 39     13      98  150 

Assessment

Sequence Method % of Final Mark
1 Assignments 25.00
2 Class Test 15.00
3 Final Exam 60.00

Module Catalogue generated from SITS CUT-OFF: 8/20/2019 6:23:19 PM