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Exotic Options - ECFS882
Since the 1970s there has been a proliferation of exotic option products traded in the financial markets. This Unit introduces you to the most important and popular types of exotic options. Average rate options, used extensively in the commodity markets, and barrier options, the most popular exotic in the foreign exchange markets are covered. Other exotics discussed include path-dependent options such as reset, shout and cliquet options, two-asset options such as spread options, and multi-asset options including basket options and ‘mountain’ structured products. We cover product descriptions, motivations for using the product, risks involved in trading the product, efficient pricing methods in the Black-Scholes framework and hedging techniques. Pricing models that can account for the market volatility smile are also discussed. Applications include the construction of structured products and a variety of these are deconstructed for analysis.
This Unit complements ECFS881, in which standard option pricing is also discussed using GARCH and term structure models.
| Credit Points: | 2 |
| When Offered: | AFC Term 4 CBD - Applied Finance Centre, City Campus, September to December |
| Staff Contact(s): | Ms Catriona March |
| Prerequisites: |
(Admission to MAppFin or PGCertAppFin or GradDipAppFin) and (AFCP801 or ECFS865) and ECFS867 |
| Corequisites: | |
| NCCW(s): | |
| Unit Designation(s): | |
| Assessed As: | Graded |
| Offered By: | Department of Applied Finance and Actuarial Studies Faculty of Business and Economics |
Timetable Information
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