Unit 1: Basics on derivatives (Ch. 7.1-7.5)
o Examples of derivatives
o Basics of derivatives pricing
o Binomial valuation
Unit 2: Options, part 1 (Ch. 8.1-8.5)
o Put-call parity
o Binomial pricing of European options
o Binomial pricing of American options
Unit 3: Options, part 2 (Ch. 8.6-8.10)
o Black-Scholes model
o Estimation of volatility
Unit 4: Valuation of risky projects, part 1(Ch. 11.1-11.5)
o Cost of capital as risk-adjusted discount rates using CAPM and APT
o Leverage effects
Unit 5: Valuation of risky projects, part 2 (Ch. 11.6-11.8, Ch.12.1-12.5)
o Certainty equivalent method
o Real options approach
o Understanding economic drivers of project values
After completing the course, students will understand
· the notion of a certainty equivalent and to how use the risk-neutral pricing approach to value of future risky cashflows
· what derivatives are, how basic derivatives work and how they can be priced
· how to value risky projects using risk-adjusted discount rates
· how to value risky projects using the real options approach
· how to analyze the economic drivers behind a risky project’s value
Participation is compulsory in the interactive part. There are grade related performance assessments in each interactive unit. There is absolutely no way to get these points if you are not present for the entire unit.
Students need to be admitted to the specialization Finance: Markets, Institutions & Instruments to register for the course.
basic knowledge of Excel or R, basics in Statistics
christian.wagner@wu.ac.at