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
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.
Lectures and homework exercises