Financial Derivatives: A Quantitative Finance View
The financial engineering of forwards, futures, swaps, and options, with Python tools for fixed income and options
What you’ll learn in Financial Derivatives
- Learn the fundamentals of derivatives at a quantitative level
- Master arbitrage, the core principle underlying derivatives, quantitative risk management and quantitative trading
- Use derivatives to control and manage financial risk
- Price forwards, futures, swaps and options
- Understand the Black-Scholes theory and formula intuitively, avoiding stochastic calculus
- Learn the limitations of the Black-Scholes theory, and how it is used in practice
- Python based tools are provided for computations with bonds, yield curves, and options
Requirements of Financial Derivatives
- Calculus and a basic course in probability and statistics
- No knowledge or background in finance is assumed
Financial Derivatives Description
Interested in a lucrative and rewarding position in quantitative finance? Are you a quantitative professional working in finance or a technical field and want to bridge the gap and become a full on quant? Then read on.
The role of a quantitative analyst in an investment bank, hedge fund, or financial company is an attractive career option for many quantitatively skilled professionals working in finance or other fields like data science, technology or engineering. If this describes you, what you need to move to the next level is a gateway to the quantitative finance knowledge required for this role that builds on the technical foundations you have already mastered.
Financial Derivatives is designed to be exactly such a gateway into the quant world. If you succeed in this course you will become a master of quantitative finance and the financial engineering of the most influential class of financial products that exist on markets today: derivatives.
What you will learn:
Many finance students and professionals find derivatives the most challenging subject in their field. But if you have a background in quantitative fields like statistics or computer science this course will show you that these most daunting of financial products are completely accessible to you.
Even if you are completely new to the world of finance, after completing Financial Derivatives you will have a deep mastery of the fundamental derivative structures traded on markets today: forwards, futures, swaps, and options. But since this course is presented by a practitioner you will also learn how derivatives are actually used in the real world, as tools for both speculation and risk management.
The world of finance and markets is fast-paced and exciting, but can also be very intimidating. In the heat of the moment, the markets are volatile and unpredictable, positions go south in unanticipated ways, you have traders yelling at you, you have computer software failing, you’re relying on data you can’t trust. Keeping your head above water in this environment can be well nigh impossible.
You need a conceptual framework that allows you to keep above the fray and keep your wits about you. In this course, my primary purpose is to convey that conceptual framework to my students. The same conceptual framework that allowed me to survive and thrive in the pits of Wall Street during the dark days of the financial crisis.
Concerned that you may not have the required background to succeed in this course? As long as you meet the formal prerequisites you need not be. A quantitatively strong business background is more than enough to meet these requirements. Any decent course in statistics and the basics of calculus is enough. In truth, high school mathematics is all that is needed for 80-90% of the course material. The most important requirement is simply to think analytically and logically.
Here is a sampling of some of the main topics that we’ll cover on your journey into the quant profession:
- Interest rate fundamentals
- Periodic and continuous compounding
- Discounted cash flow analysis
- Bond analysis
- The fundamentals of equity, currency, and commodity assets
- Portfolio modelling
- Long and short positions
- The principle of arbitrage
- The Law of One Price
- Forwards, futures, and swaps
- Risk management principles
- Futures hedging
- Stochastic processes
- Time series concepts
- The real statistics of asset prices: volatility clustering and autocorrelation
- Fat-tailed distribution and their importance for financial assets
- Brownian motion
- The log-normal model of asset prices
- Options
- Put-call parity
- The binomial model of option pricing
- The Black-Scholes theory and formula
- Option greeks: delta, gamma, and vega
- Dynamic hedging
- Volatility trading
- Implied volatility
Includes Python tools
Python based tools are now included for computations with bonds, yield curves, and options. All software that is part of Financial Derivatives is released under a permissive MIT license, so students are free to take these tools with them and use them in their future careers, include them in their own projects, whether open source or proprietary, anything you want!
Who Financial Derivatives is for
- Technical professionals who want to learn about quantitative finance
- Finance professionals who want to improve their quantitative skills and learn how to analyze derivative products
