Knowledge

After completing this course the student knows the principles of pricing by (lack of) arbitrage. The student has knowledge about basic derivative instruments, as well as how such instruments are priced. by arbitrage free pricing. Furthermore, the student knows basic use such instruments in risk management.

Skills

- The student knows how to replicate any derivative instrument's cashflow either by other derivatives or by so-called underlying assets.
- The student can apply specific models based on no-arbitrage pricing theory to value new kinds of derivative instruments.
- The student can suggest proper use of derivatives for various hedging situations.

General competence

A student will be able to communicate knowledge, both written and orally to both academics and market specialists of derivatives and to assess risk connected to the use of basic derivatives.