Enroll Course: https://www.coursera.org/learn/financial-engineering-advancedtopics
For anyone looking to deepen their understanding of financial derivatives, the Coursera course ‘Advanced Topics in Derivative Pricing’ is an exceptional choice. This course goes beyond the basics, offering a comprehensive exploration of complex derivative pricing models and their real-world applications.
The journey begins with a thorough review of the Black-Scholes model, a cornerstone of option pricing. The course meticulously explains how to derive the ‘Greeks’ – Delta, Gamma, Theta, Vega, and Rho – which are crucial for understanding an option’s sensitivity to various factors like underlying asset price, volatility, and time to expiration. The practical importance of these Greeks in risk management and hedging strategies is emphasized, showing how they are used to manage portfolio value and mitigate risk.
Moving into ‘Equity Derivatives in Practice,’ the course delves into implied volatility and the intriguing ‘volatility smile’ or ‘skew.’ It explores explanations for this phenomenon, such as risk aversion and the leverage effect, and demonstrates how to utilize the volatility surface for pricing more complex derivatives like digital options and range accruals. A particularly valuable aspect is the introduction to deriving risk-neutral densities from market option prices, offering a model-free perspective on equity derivatives. The real-world assignment in this section provides a fantastic opportunity to apply theoretical knowledge to practical problems.
The syllabus then shifts to ‘Credit Derivatives and Structured Products,’ tackling topics like Collateralized Debt Obligations (CDOs) and the Gaussian Copula model. Given the significant role CDOs played in the 2008 financial crisis, understanding their pricing and risk management is vital for anyone in structured finance. The course breaks down CDO tranches, synthetic CDOs, and the calculation of fair values, providing insights into portfolio management for these complex instruments.
Finally, ‘Other Applications of Financial Engineering’ introduces the concept of real options, which are particularly relevant for assets with high volatility and numerous uncertainties. Using natural gas and electricity options as examples, the course showcases valuation methods like dynamic programming, demonstrating the broad applicability of financial engineering principles.
Overall, ‘Advanced Topics in Derivative Pricing’ is a rigorous yet accessible course that equips learners with advanced analytical tools and practical insights. It’s highly recommended for finance professionals, quantitative analysts, and advanced students seeking to master the intricacies of derivative pricing and risk management.
Enroll Course: https://www.coursera.org/learn/financial-engineering-advancedtopics