Advanced Excel PC Workshop - Option Pricing and Risk Assessment

Day One

09.00 - 09.15 Welcome and Introduction

09.15 - 12.00 Option Pricing Models

• Analytical Option Pricing Models
  • The Black-Scholes model
  • The Garman-Kohlhagen model
  • The Black 76 model
  • Pricing with analytical models
  • Risk Analysis: Delta, Gamma, Vega and the other “Greeks”
• Workshop:
      Participants Implement Analytical Models and Use Analytical option Pricing Models for pricing and Risk Analysis of Currency Option.
• Numerical Option Pricing Models
  • The CRR Model
  • Term structure Models (CIR, BDT, Hull-White) - overview
• Workshop:
      Participants implement, calibrate and test a CRR model for pricing and risk analysis of American stock options.

12.00 - 13.00 Lunch

13.00 - 16.30 Volatility Analysis

• Volatility Glossary and the Role Volatility in Option Pricing
• Option Volatility Framework
  • Volatility Smiles, Skews and Surfaces
  • Modelling and Forecasting Volatility
• Forward Volatility and Forward Starting Options
• Workshop:
      Computing Volatility. Participants Analyse Data Sample and Construct Volatility Curves.

Using Option Sensitivities in Trading and Risk Management

• Overview of Option Risk Assessment (Greeks)
• Delta Hedging and Risk Analysis
• Volatility Trading and Hedging (Gamma and Vega)
• Workshop:
      Volatility Trading and Hedging Applications in Excel

Day Two

09.00 - 09.15 Recap

09.15 - 12.00 Monte Carlo Toolkit

• Generating Random Numbers
  • Random number generators – how they work
  • Testing the Excel/VB random number generator
• Statistical Distributions
  • Uniform, normal and log-normal distributions
  • Binomial distribution, Poisson distribution etc.
• Sampling Techniques
  • Generating normally distributed random numbers
  • Drawing form multivariate distributions
• Simulation Stochastic Differential Equations
• Estimating Return Distributions and calculating VaR and Extreme VaR
• Workshop:
      Participants program and test a “Monte Carlo” engine and test it by simulation SDE’s.

12.00 - 13.00 Lunch

13.00 - 16.00 Pricing and Risk Analysis of Exotic Options

• Types of Exotic Options
• Modelling Issues and Valuation Methods
• Pricing Path-Dependent Options
  • Barrier options
  • Asian options
  • Lookbacks, ladders and ratchet options
• Pricing Discrete Pay-Off Options
  • Digital options
  • Touch options
• Multivariate Options
  • Basket options
  • Rainbow options
• Workshop:
      Participants use MC Simulation for pricing and risk analysis of selected types of exotic options.

Evaluation and Termination of the Workshop