- Lecturer: Rama Cont
Course term: Michaelmas
Course lecture information: 5 x Introductory lectures in week -1 (7 hours total)
Course overview:
This course is an introduction to basic concepts in finance and provides an overview of financial markets and financial instruments.
Course synopsis:
• Lecture 1: stocks and bonds.
Financing a project: debt and equity.
Balance sheet of a firm. Solvency and liquidity.
Private vs public markets. Securitisation and IPOs.
Stocks and bonds. Stock markets and debt securities.
• Lecture 2: Lending and borrowing.
Time value of money. Compounding and discounting.
Term structure of interest rates.
Present value. Valuation of a stream of riskless cashflows.
Bond pricing. Yield curves.
• Lecture 3: Risk and hedging. Financial derivatives
The random nature of market prices.
Forwards, futures, call and put options, path-dependent options.
Futures contracts. Exchange-traded futures.
Commonly used option strategies.
• Lecture 4: Arbitrage pricing
Actuarial pricing vs arbitrage pricing.
Valuation of a forward contract. Forward price.
Absence of arbitrage as a valuation principle.
Absence of arbitrage and the law of one price.
• Lecture 5: Absence of arbitrage.
Absence of arbitrage and its implications.
Arbitrage inequalities.
Detection of arbitrage opportunities in market prices.
Financing a project: debt and equity.
Balance sheet of a firm. Solvency and liquidity.
Private vs public markets. Securitisation and IPOs.
Stocks and bonds. Stock markets and debt securities.
• Lecture 2: Lending and borrowing.
Time value of money. Compounding and discounting.
Term structure of interest rates.
Present value. Valuation of a stream of riskless cashflows.
Bond pricing. Yield curves.
• Lecture 3: Risk and hedging. Financial derivatives
The random nature of market prices.
Forwards, futures, call and put options, path-dependent options.
Futures contracts. Exchange-traded futures.
Commonly used option strategies.
• Lecture 4: Arbitrage pricing
Actuarial pricing vs arbitrage pricing.
Valuation of a forward contract. Forward price.
Absence of arbitrage as a valuation principle.
Absence of arbitrage and the law of one price.
• Lecture 5: Absence of arbitrage.
Absence of arbitrage and its implications.
Arbitrage inequalities.
Detection of arbitrage opportunities in market prices.