Options, Pricing, and Risk Management Part I

In this quantitative finance training course, you will have an introduction to derivatives instruments, option pricing and risk management.

The course is composed of many videos, quizzes, applications and tutorials in Python.

A certificate of achievements will be delivered once the course has been completed with success.

In the first week, we will focus on derivative instruments, forward and option contracts. We will review key option strategies, we will see the differences between European and American style options, and we will explore the most commonly used exotic options. In the first tutorial in Python, we will compare the P&L at expiration of several option strategies.

In the second week, you will learn the basic concepts of arbitrage-free pricing, the valuation of derivatives by replication and risk-neutrality, and the pricing of options in a binomial tree model. In the second tutorial, you will build a binomial tree model to price European and American options.

The famous Black-Scholes model will be introduced in the third week. We will discuss the partial differential equations, the risk-neutral martingale approaches for option pricing and the limits of the model. In the third tutorial you will  implement the Black-Scholes closed-form formula to price European call and put options and you will show that the price of an option in a binomial model converges to the Black-Scholes price when the number of time steps becomes large.

In the last week, we will review the main option Greeks and you will learn how they can help to evaluate and manage the risks and rewards of an option portfolio. In the fourth tutorial, you will implement the option Greeks and analyse how they evolve when the spot and the time to maturity change. You will finally, step-by-step, calculate and analyse the P&L of delta- and gamma-hedged option strategies.