3704068: Derivatives, financial engineering and risk

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Semester:SS 14
Scheduled in semester:2
Semester Hours per Week / Contact Hours:54.0 L / 40.5 h
Self-directed study time:109.5 h

Module coordination/Lecturers


Master's degree programme in Banking and Financial Management (01.10.2008)


  • Derivatives markets
  • Major types of equity, interest rate, FX, and credit derivatives (forwards, futures, options, swaps, plain vanilla, exotic,…)
  • Pricing models for derivatives (binomial model, Black-Scholes model, Black model, Libor Market model)
  • Greek letters and hedging
  • Financial Engineering
  • Risk management with focus on derivatives
  • Operational risk management

Learning Outcomes

  • Know how derivatives and derivatives markets work
  • Know the theoretical foundations of the standard pricing models for derivatives, and be able to apply them in practice
  • Devise and/or analyze derivatives strategies for speculation, hedging and arbitrage
  • Combine basic instruments to achieve desired payoff structures/decompose payoff structures into their basic components
  • Knowledge of risk management essentials, standard risk measures, and their peculiarities with respect to portfolios containing derivatives
  • Management tools to identify, evaluate, manage and monitor Operational Risks (loss data base, risk self assessments, scenario analysis, key risk indicators)
  • Concepts for calculating Operational Risks


Lectures Method

Interactive lecture with exercises


Required reading:

  • Hull: Options, Futures and Other Derivatives. Prentice Hall, 7th int. ed., 2010.
  • Murphy: Understanding Risk. Chapman & Hall, 2008.
  • Greg. N. Gregoriou (Hrsg.): Operational Risk Toward Basel III, 2009.
  • Anna S. Chernobai, Svetlozar T. Rachev, Frank J. Fabozzi: Operational Risk – A Guide to Basel II Capital Requirements, Models, and Analysis, 2007.


Lecture slides and additional literature will be available on moodle

Exam Modalities

  • Assignment
  • Written examination with 80 minutes editing time
  • Obligatory class participation (Abenthum)


27.02.201409:00 - 16:30H4
28.02.201409:00 - 16:30H4
01.03.201409:00 - 16:30H4
27.03.201409:00 - 16:30H4
28.03.201409:00 - 16:30H4
10.05.201409:00 - 16:30H4