IME611A - Financial Engineering

Module 1 : Basic Elements of Financial Systems and Financial Management Fundamentals of Financial Systems and Domain Knowledge of Financial Management Module 2 : Mathematical Background Introduction to Stochastic Calculus : Wiener processes and Itos lemma, Stochastic Differential Equations, Martingales and Measures Numerical procedures : Binomial & trinomial trees, Monte Carlo simulation; finite difference methods Module 3 : Options and Futures Markets Forward and futures contracts : Basic definition, Differences between Forwards & Futures, Futures & Forwards on Commodities & Currencies, Valuation of Futures, Interest Rate Futures. Swaps: Currency Swaps, Interest Rate Swaps Options : Definitions, Payoff Diagrams, General Arbitrage Relationships, The Binomial Method, Applications to Hedging & Speculating, Delta Hedging, Arbitraging mis-priced Options, Pricing of Stock Options on Stock Indices, Currencies, and Futures. Module 4 : Financial Risk Management Introduction : Different types of risk ; approaches to risk management; history of bank regulation. Greek letters : Definitions and how they are used.