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 Course module: 202000412
 202000412Option Pricing
 Course info
Course module202000412
Credits (ECTS)2.5
Course typeStudy Unit
Language of instructionEnglish
Contact persondr. P.K. Mandal
E-mailp.k.mandal@utwente.nl
Lecturer(s)
 Contactperson for the course dr. P.K. Mandal Lecturer dr. P.K. Mandal Lecturer dr. B. Roorda Examiner dr. B. Roorda
Starting block
 1A
Application procedureYou apply via OSIRIS Student
Registration using OSIRISYes
 Aims
 body { font-size: 9pt; font-family: Arial } table { font-size: 9pt; font-family: Arial } After successfully finishing this course, the student is able to: Explain various types of derivative products, in particular, European and American Call and Put Options; Recognize and create new financial products by combining various standard financial/derivative products;   Identify the influence of different economic factors on option prices; Calculate the (numerical) price of an Option using a binomial tree (option-delta and risk-neutral method).
 Content
 body { font-size: 9pt; font-family: Arial } table { font-size: 9pt; font-family: Arial } This course is a part of Module “Finance for Engineers” (202000410). In this course, derivative products, such as options, and futures are introduced.  You will learn how they are used in financial decision-making. The focus of the course is the pricing/valuation of such derivative products, in particular different types of options.  The general techniques such as no-arbitrage pricing theory and risk-neutral pricing theory will be explained.  As applications of these, Binomial trees will be used in conjunction with the Option-delta method as well as discounted risk-neutral expectation to determine the price of European and American -- call and put -- options. Along the way, you will also learn the influence of different economic factors on option prices.
 Assessment
 body { font-size: 9pt; font-family: Arial } table { font-size: 9pt; font-family: Arial } Written exam (Option Pricing part of the combined test) (100%)
Assumed previous knowledge
 Basics of statistics and probability, incl. expectation/mean, variance, correlation, standard deviation.
 Module
 Module 5
 Participating study
 Bachelor Industrial Engineering and Management
 Participating study
Required materials
Book
 As for Accounting and Finance, two chapters on Option Pricing.
Book
 Brealey Myers Allen, Principles of Corporate Finance (14e international edition) Recommend to buy in combination with Connect; Use of 13th edition still possible.
Recommended materials
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Instructional modes
Lecture
 Presence duty Yes

Tutorial
 Presence duty Yes

Tests
 Test Option Pricing
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