Discount bonds, interest rates, yield curves. Pricing formulae for caps, floors, swaptions. Multi-currency interest rate models. L.P. Hughston, ed. This course surveys pricing and risk management techniques for a number of important financial derivatives.
Implied volatility smiles and implied trees.
R. Jarrow, ed. Theory of risk aversion and utility, with applications. Trading strategies, consumption and portfolio value processes, expected utility from consumption and terminal wealth. Portfolio optimisation, solution of Merton problem. Transaction costs, market incompleteness, portfolio constraints, convex duality techniques.