This information is indicative and can be subject to change.
Arbitrage theory
Teacher: Christophe Chorro
E-mail: [email protected]
ECTS: 2.5
Evaluation: Final Exam
Previsional Place and time: MSE, Wednesday from 13h to 16h
Prerequisites: Basic functional analysis, Probability theory
Aim of the course: This course is an introduction to the notion of arbitrage in Finance in the discrete time setting. We show in particular the fundamental theorem of asset pricing linking arbitrage opportunities and equivalent martingale measure. In the framework of complete markets we study how to deduce the price of European derivatives from underlying dynamics and how to hedge associated risks. We generalize the preceding framework considering the problems of:
• Evaluation of American options and hedging using strategies with consumption.
• Over-replication in incomplete markets.
• Dividends and transaction costs.
Syllabus:
0) Presentation of the problem
0.1) The model
0.2) Investment strategies
0.3) Arbitrage opportunities
1) Fundamental theorem of asset pricing (Harrisson-Pliska)
2) Complete markets
3) Pricing by no arbitrage (Kreps)
4) American options
5) Extensions
References:
Course material is available here.
• F. Delbaen & W. Schachermayer : The mathematics of arbitrage, Springer
• D. Duffie : Dynamic Asset pricing theory, Princeton university Press 2001.
Arbitrage theory
Teacher: Christophe Chorro
E-mail: [email protected]
ECTS: 2.5
Evaluation: Final Exam
Previsional Place and time: MSE, Wednesday from 13h to 16h
Prerequisites: Basic functional analysis, Probability theory
Aim of the course: This course is an introduction to the notion of arbitrage in Finance in the discrete time setting. We show in particular the fundamental theorem of asset pricing linking arbitrage opportunities and equivalent martingale measure. In the framework of complete markets we study how to deduce the price of European derivatives from underlying dynamics and how to hedge associated risks. We generalize the preceding framework considering the problems of:
• Evaluation of American options and hedging using strategies with consumption.
• Over-replication in incomplete markets.
• Dividends and transaction costs.
Syllabus:
0) Presentation of the problem
0.1) The model
0.2) Investment strategies
0.3) Arbitrage opportunities
1) Fundamental theorem of asset pricing (Harrisson-Pliska)
2) Complete markets
3) Pricing by no arbitrage (Kreps)
4) American options
5) Extensions
References:
Course material is available here.
• F. Delbaen & W. Schachermayer : The mathematics of arbitrage, Springer
• D. Duffie : Dynamic Asset pricing theory, Princeton university Press 2001.
