Finance and insurance

The goal of this course is to describe the main pricing methodologies for financial instruments, when the underlyings are governed by either discrete-time and continuous-time stochastic processes, with particular emphasis on the Black-Scholes-Merton model. Moreover, the course provides computational tools for pricing and hedging. The main topics will be introduced from a theoretical perspective. Furthermore, they will be analyzed from a computational point of view, using MATLAB software. • (Knowledge and understanding) At the end of the course, students will be able to apply the main numerical methodologies for financial derivatives pricing, both in discrete-time and continuous-time diffusion market models. They will also be able to understand and illustrate the main characteristics of each numerical method and to recognize the most effective solution to the economic-financial problem they will face. Finally, they will manage to apply the theoretical framework to practical experiences, in order to obtain the fair value of derivative securities. • (Applying knowledge and understanding) The students who pass the exam can identify the suitable model to describe the financial structure, and also establish the most efficient methodologies to solve the related financial issues. • (Making judgements) By using the information inferred from the lectures, students autonomously may inspect the financial context, take into account the whole range of methods to use, and interpret the obtained results. • (Communication skills) After passing the exam (that consists of a written/practical text with open-ended questions and/or exercises and/or practical works with Matlab), students will be able to adequately outline the main topics covered by the lectures, either verbally or through written documents. • (Learning skills) Standard lectures, lab activities and self-study allow students to develop a method to autonomously acquire new financial knowledge and theoretical\practical skills.