Futures and Options - Pricing Workshop

Day One

09.00 - 09.15 Welcome and Introduction

09.15 - 10.15 Pricing Futures

• Brief Review of the Cost-of-Carry Model
• Cheapest-to-Deliver (CTD) Analysis
• Workshop: Identifying the CTD Bond
• Sensitivity Analysis

10.30 - 12.00 Analytical Option Pricing

• The Principle of Risk Neutral Valuation
• Derivation of the Black-Scholes Model
• Other Analytical Models
  • Black 76
  • Garman-Kohlhagen
  • Margrabe
• Option Sensitivities
• Workshop: Pricing and sensitivity analysis of selected stock, bond and currency options

12.00 - 13.00 Lunch

13.00 - 16.00 Numerical Option Pricing

• Binomial Models for Stock Options
  • The Cox-Ross-Rubinstein Model
  • Pricing American Stock Options
  • Handling Dividend Payments
  • Workshop: Setting up a CRR tree and valuing American Stock Options
• Models for Interest Rate Options
  • Equilibrium and No-arbitrage models
  • Valuing selected interest rate options
  • Workshop: Pricing bond options using the BDT model
• Monte Carlo Simulation
  • Random number generation
  • Setting up and simulating stochastic differential equations
  • Pricing "Path Dependent" Options
  • Workshop: Using simplified MC approach to valuing path-dependent options

16.00 - 16.15 Evaluation and Termination of the Seminar