The concepts that underlie derivative assets are encountered by investors, managers and other market participants daily—often in situations where the word “derivative” is not used. Elements of a firm’s capital structure, insurance, compensation contracts, mortgage financing, investing and other decisions may be better understood if one has an understanding of how derivative assets are structured and valued.
This course will cover the basics of how options, futures and forward contracts are structured and valued. We will discuss the motivation to trade in these assets, including potential benefits and costs. Examples of their uses (including hedging) across multiple markets will be developed. In addition to valuation, the course will emphasize how the intuition developed from an understanding of these derivative securities can be used in other contexts. A working knowledge of basic mathematics and statistics is assumed.