This course focuses on computational methods in option and interest rate, product’s pricing and model calibration. The first module will introduce different types of options in the market, followed by an in-depth discussion into numerical techniques helpful in pricing them, e.g. Fourier Transform (FT) and Fast Fourier Transform (FFT) methods. We will explain models like Black-Merton-Scholes (BMS), Heston, Variance Gamma (VG), which are central to understanding stock price evolution, through case studies and Python codes. The second module introduces concepts like bid-ask prices, implied volatility, and option surfaces, followed by a demonstration of model calibration for fitting market option prices using optimization routines like brute-force search, Nelder-Mead algorithm, and BFGS algorithm. The third module introduces interest rates and the financial products built around these instruments. We will bring in fundamental concepts like forward rates, spot rates, swap rates, and the term structure of interest rates, extending it further for creating, calibrating, and analyzing LIBOR and swap curves. We will also demonstrate the pricing of bonds, swaps, and other interest rate products through Python codes. The final module focuses on real-world model calibration techniques used by practitioners to estimate interest rate processes and derive prices of different financial products. We will illustrate several regression techniques used for interest rate model calibration and end the module by covering the Vasicek and CIR model for pricing fixed income instruments.
This course is part of the Financial Engineering and Risk Management Specialization
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Coursera Labs
Includes hands on learning projects.
Learn more about Coursera Labs Course 5 of 5 in the
Intermediate Level
Students should have intermediate to advanced undergraduate courses in: (i) probability and statistics, (ii) linear algebra, and (iii) calculus.
Approx. 23 hours to complete
English
Skills you will gain
- Interest Rate
- model calibration
- product pricing
- option
Flexible deadlines
Reset deadlines in accordance to your schedule.
Shareable Certificate
Earn a Certificate upon completion
100% online
Start instantly and learn at your own schedule.
Coursera Labs
Includes hands on learning projects.
Learn more about Coursera Labs Course 5 of 5 in the
Intermediate Level
Students should have intermediate to advanced undergraduate courses in: (i) probability and statistics, (ii) linear algebra, and (iii) calculus.
Approx. 23 hours to complete
English
Offered by
Syllabus - What you will learn from this course
1 hour to complete
Course Overview
1 hour to complete
3 readings
5 hours to complete
Option Pricing and Numerical Approach
5 hours to complete
17 videos (Total 145 min), 2 readings, 3 quizzes
7 hours to complete
Model Calibration
7 hours to complete
11 videos (Total 117 min), 1 reading, 2 quizzes
5 hours to complete
Interest Rates and Interest Rate Instruments Part I
5 hours to complete
9 videos (Total 71 min), 1 reading, 2 quizzes
About the Financial Engineering and Risk Management Specialization

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