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Derivatives II - Tutorial
040180; Wednesday: 08:00am – 10:00am (J253), Wednesday: 12:00pm – 02:00pm (J253); 1. Term


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Date File Comment

Course Information

Semester: Winter Term 2017/2018
Term: 1st term
Course Number: 040180
Lecturer: Prof. Dr. Nicole Branger
Contact Persons: Hendrik Hülsbusch, M.Sc.
René Marian Flacke, M.Sc.
Room: J253
Dates: Wednesday: 08:00am – 10:00am, J253
Wednesday: 12:00pm – 02:00pm, J253
Language: English
Credits: 6 ECTS (Master)
Semester hours: 2 + 2
Module(s): FCM13: Ausgewählte Kapitel des Finance I - Master of Science 'Betriebswirtschaftslehre' (PO 2010)
FCM14: Ausgewählte Kapitel des Finance II - Master of Science 'Betriebswirtschaftslehre' (PO 2010)

Description / Main Topics
Within the scope of the class “Derivatives II” the students will be taught further topics on option pricing. The main focus of this course is on interest rate derivatives and interest rate models. The most important discrete-time and continuous-time models, currently discussed in both literature and practice, will be introduced. In particular, we will elaborate on implementing the models as well as the conceptual differences between those. Furthermore, we will analyze the most important interest rate derivatives such as caps, floors and swaps. Moreover, questions related to the management of interest rate risks and credit risks will be discussed. The lecture is supplemented by a tutorial which may consist of exercises and case studies, talks of visiting researchers and practitioners as well as thorough discussions of main contributions from the literature. All classes will be held in English.

Learning Outcomes
The students can handle the relevant tools to price interest rate derivatives. They are familiar with the most important models and know in which ways they are distinct from each other and can make a decision as to which model fits and is applied to a certain situation. They also gain some first experience in implementing the models. Compared to the “Derivatives I” class, the students possess a deeper understanding of the mathematical tools frequently used in this area, in particular the basic concepts from stochastic calculus.

Soft skills:
Clear thinking

Course Assessment
Exam (Master PO 2010: 120 minutes)

Recommended: Module "Derivatives I"

The class consists of lectures and tutorials which are both relevant for passing the exam. Due to the term structure, we will (roughly) provide two lectures and two tutorials each week. Please note that it is not yet determined at which time and date there will be a lecture or a tutorial. An exact schedule will be provided in the first lecture. The class will be taught in English. The exam will be written in English, too.

Reading Material
Branger, N., Schlag, C.: Zinsderivate: Modelle und Bewertung, Springer, 2004.
Munk, C.: Fixed Income Modeling, Oxford University Press, 2011.
Brigo, D., Mercurio, F.: Interest Rate Models: Theory and Practice, Springer, 2006.
Schönbucher, P.: Credit Derivatives Pricing Models, Wiley, 2003.
Black, F.: The Pricing of Commodity Contracts, Journal of Financial Economics, 1976.
Black, F., Derman, E., Toy, W.: A One-Factor Model of Interest Rates and its Application to Treasury Bond Options, Financial Analysts Journal, 1990.
Cox, J.C., Ingersoll, J.E., Ross, S.A.: A Theory of the Term Structure of Interest Rates, Econometrica, 1985.
Heath, D., Jarrow, R., Morton, A.: Bond Pricing and the Term Structure of Interest Rates: A New Methodology, Econometrica, 1992.
Ho, T., Lee, S.-B.: Term Structure Movements and Pricing Interest Rate Contingent Claims, Journal of Finance, 1986.
Vasicek, O.: An Equilibrium Characterization of the Term Structure, Journal of Financial Economics, 1977.

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