This course is divided into four parts. Next, we will move into the area of transaction costs due to liquidity constraints. We will analyze how low liquidity in trading the underlying asset affects implied volatility and dynamic hedging. Third, we will consider different ways of of modeling markets with uncertain volatility. We will cover stochastic volatility models, auto-regressive models as well as recently derived nonlinear pricing models.
Topics tend to change from one year to the next.
Lecture Notes 1. Brownian Motion and Ito Calculus. Valuation of derivative securities 6. Basic term structure concepts 9.