Financial Engineering and Risk Management Part I

About this Course

Financial Engineering is a multidisciplinary field drawing from finance and economics, mathematics, statistics, engineering and computational methods. The emphasis of FE & RM Part I will be on the use of simple stochastic models to price derivative securities in various asset classes including equities, fixed income, credit and mortgage-backed securities. We will also consider the role that some of these asset classes played during the financial crisis. A notable feature of this course will be an interview module with Emanuel Derman, the renowned ``quant'' and best-selling author of "My Life as a Quant". We hope that students who complete the course will begin to understand the "rocket science" behind financial engineering but perhaps more importantly, we hope they will also understand the limitations of this theory in practice and why financial models should always be treated with a healthy degree of skepticism. The follow-on course FE & RM Part II will continue to develop derivatives pricing models but it will also focus on asset allocation and portfolio optimization as well as other applications of financial engineering such as real options, commodity and energy derivatives and algorithmic trading.

100% online courses

Start instantly and learn at your own schedule.

Approx. 31 hours to complete

Suggested: 12 hours videos and quizzes

English

Subtitles: English

Skills you will gain

PricingFinancial ModelingDerivative (Finance)Bond Market

100% online courses

Start instantly and learn at your own schedule.

Approx. 31 hours to complete

Suggested: 12 hours videos and quizzes

English

Subtitles: English

Syllabus - What you will learn from this course

1

Section

29 minutes to complete

Course Overview

An introduction to the course....

1 video (Total 9 min), 2 readings

1 videos

Course Overview8m

2 readings

Course Overview10m

About Us10m

2

Section

2 hours to complete

Introduction to Basic Fixed Income Securities

Review of interest and basic fixed income securities; introduction to arbitrage pricing. ...

4 videos (Total 70 min), 2 readings, 1 quiz

4 videos

Introduction to No-arbitrage13m

Interest Rates and Fixed Income Instruments21m

Floating Rate Bonds and Term Structure of Interest Rates21m

Forward Contracts13m

2 readings

Lesson Supplements10m

1 practice exercises

Introduction to Basic Fixed Income Securities14m

3

Section

2 hours to complete

Introduction to Derivative Securities

The mechanics of forwards, futures, swaps and options. Option pricing in the 1-period binomial model....

7 videos (Total 99 min), 2 readings, 1 quiz

7 videos

Swaps10m

Futures 17m

Futures Excel7m

Options17m

Options Pricing13m

The 1-Period Binomial Model12m

Option Pricing in the 1-Period Binomial Model20m

2 readings

Lesson Supplements10m

1 practice exercises

Introduction to Derivative Securities12m

4

Section

2 hours to complete

Option Pricing in the Multi-Period Binomial Model

Derivatives pricing in the binomial model including European and American options; handling dividends; pricing forwards and futures; convergence of the binomial model to Black-Scholes....

8 videos (Total 95 min), 2 readings, 1 quiz

8 videos

The Multi-Period Binomial Model17m

What’s Going On?12m

Pricing American Options11m

Replicating Strategies16m

Including Dividends8m

Pricing Forwards and Futures in the Binomial Model11m

The Black-Scholes Model11m

An Example: Pricing a European Put on a Futures Contract6m

2 readings

Lesson Supplements10m

Quiz Instructions10m

1 practice exercises

Option Pricing in the Multi-Period Binomial Model16m

5

Section

2 hours to complete

Term Structure Models I

Binomial lattice models of the short-rate; pricing fixed income derivative securities including caps, floors swaps and swaptions; the forward equations and elementary securities....

8 videos (Total 92 min), 2 readings, 1 quiz

8 videos

Introduction to Term Structure Lattice Models11m

The Cash Account and Pricing Zero-Coupon Bonds15m

Fixed Income Derivatives: Options on Bonds9m

Fixed Income Derivatives: Bond Forwards9m

Fixed Income Derivatives: Bond Futures9m

Fixed Income Derivatives: Caplets and Floorlets 8m

Fixed Income Derivatives: Swaps and Swaptions12m

The Forward Equations15m

2 readings

Lesson Supplements10m

Quiz Instructions10m

1 practice exercises

Term Structure Models I12m

6

Section

3 hours to complete

Term Structure Models II and Introduction to Credit Derivatives

Calibration of term-structure models; the Black-Derman-Toy and Ho-Lee models. Limitations of term-structure models and derivatives pricing models in general. Introduction to credit-default swaps (CDS) and the pricing of CDS and defaultable bonds....

8 videos (Total 120 min), 3 readings, 1 quiz

8 videos

Model Calibration17m

An Application: Pricing a Payer Swaption in a BDT Model12m

Fixed Income Derivatives Pricing in Practice6m

Modeling Defaultable Bonds15m

Pricing Defaultable Bonds16m

Credit Default Swaps18m

Pricing Credit Default Swaps12m

Interview with Emmanuel Derman19m

3 readings

Lesson Supplements10m

Quiz Instructions10m

1 practice exercises

Term Structure Models II and Introduction to Credit Derivatives10m

7

Section

2 hours to complete

Introduction to Mortgage Mathematics and Mortgage-Backed Securities

Basic mortgage mathematics; mechanics of mortgage-backed securities (MBS) including pass-throughs, principal-only and interest-only securities, and CMOs; pricing of MBS; MBS and the financial crisis....

7 videos (Total 93 min), 2 readings, 1 quiz

7 videos

Introduction to Mortgage Mathematics and Mortgage-Backed Securities20m

Prepayment Risk and Mortgage Pass-Throughs16m

Mortgage Pass-Throughs in Excel7m

Principal-Only and Interest-Only MBS13m

Risks of Principal-Only and Interest-Only MBS11m

Collateralized Mortgage Obligations (CMOs)11m

Pricing Mortgage-Backed Securities13m

2 readings

Lesson Supplements10m

Quiz Instructions10m

1 practice exercises

Introduction to Mortgage Mathematics and Mortgage-Backed Securities18m

8

Section

2 hours to complete

Background Material

...

10 videos (Total 139 min), 1 reading

10 videos

Review of Basic Probability18m

Review of Conditional Expectations and Variances8m

Review of Multivariate Distributions11m

The Multivariate Normal Distribution6m

Introduction to Martingales14m

Introduction to Brownian Motion9m

Geometric Brownian Motion9m

Review of Vectors17m

Review of Matrices23m

Review of Linear Optimization19m

1 readings

Lesson Supplements10m

Frequently Asked Questions

When will I have access to the lectures and assignments?
Once you enroll for a Certificate, you’ll have access to all videos, quizzes, and programming assignments (if applicable). Peer review assignments can only be submitted and reviewed once your session has begun. If you choose to explore the course without purchasing, you may not be able to access certain assignments.
What will I get if I pay for this course?
If you pay for this course, you will have access to all of the features and content you need to earn a Course Certificate. If you complete the course successfully, your electronic Certificate will be added to your Accomplishments page - from there, you can print your Certificate or add it to your LinkedIn profile. Note that the Course Certificate does not represent official academic credit from the partner institution offering the course.
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Is financial aid available?
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Financial Engineering and Risk Management Part I