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Financial Valuation Methodology, 6 credits
Finansiell värderingsmetodik, 6 hp
TPPE53
Main field of study
Industrial Engineering and ManagementCourse level
Second cycleCourse type
Programme courseExaminer
Jonas EkblomDirector of studies or equivalent
Fredrik PerssonEducation components
Preliminary scheduled hours: 24 hRecommended self-study hours: 136 h
ECV = Elective / Compulsory / Voluntary
Main field of study
Industrial Engineering and ManagementCourse level
Second cycleAdvancement level
A1XCourse offered for
- Industrial Engineering and Management - International, M Sc in Engineering
- Industrial Engineering and Management, M Sc in Engineering
- Applied Physics and Electrical Engineering, M Sc in Engineering
- Mathematics, Master's programme
- Applied Physics and Electrical Engineering - International, M Sc in Engineering
Entry requirements
Note: Admission requirements for non-programme students usually also include admission requirements for the programme and threshold requirements for progression within the programme, or corresponding.
Prerequisites
Introductory courses in statistics, probability theory, and financial theory (Corporate Finance and/or Financial Markets and Instruments, and Financial Risk Management or comparable courses). An introductory course in stochastic processes is recommended.
Intended learning outcomes
The main aim of the course is to provide knowledge on an advanced level on financial valuation methodologies, mainly concerning contingent claims. After the course the student should be able to derive the Black-Scholes-Merton partial differential equation and to price exotic options using numerical techniques. Another objective is to provide insights into yield-curve modeling, specifically short rate models and the Heath-Jarrow-Morton framework.
Course content
Introduction to continuous stochastic processes and stochastic calculus. Option valuation in continuous time. Black-Sholes and alternative option models. Exotic options. Change of probability measure. Risk neutral valuation. Numerical methods for valuing derivatives. Models of the term structure of interest rates and valuation of interest rate derivatives.
Teaching and working methods
The teaching is organized in lectures, seminars and problem sessions. The seminars will be used for presentations and discussions of the group assignments. The problem sessions aim to support the students in the learning of the course material.
Examination
| UPG2 | Assignments | 2 credits | U, G |
| TEN1 | Written examinations | 4 credits | U, 3, 4, 5 |
Grades
Four-grade scale, LiU, U, 3, 4, 5Other information
Supplementary courses:
Financial optimization
Department
Institutionen för ekonomisk och industriell utvecklingDirector of Studies or equivalent
Fredrik PerssonExaminer
Jonas EkblomCourse website and other links
http://www.iei.liu.se/prodek/utbildning/tppe53Education components
Preliminary scheduled hours: 24 hRecommended self-study hours: 136 h
Course literature
Additional literature
Books
- Hull, J.C., Options, Futures, and Other Derivaties
| Code | Name | Scope | Grading scale |
|---|---|---|---|
| UPG2 | Assignments | 2 credits | U, G |
| TEN1 | Written examinations | 4 credits | U, 3, 4, 5 |
Regulations (apply to LiU in its entirety)
The university is a government agency whose operations are regulated by legislation and ordinances, which include the Higher Education Act and the Higher Education Ordinance. In addition to legislation and ordinances, operations are subject to several policy documents. The Linköping University rule book collects currently valid decisions of a regulatory nature taken by the university board, the vice-chancellor and faculty/department boards.
LiU’s rule book for education at first-cycle and second-cycle levels is available at http://styrdokument.liu.se/Regelsamling/Innehall/Utbildning_pa_grund-_och_avancerad_niva.
Additional literature
Books
Hull, J.C., Options, Futures, and Other Derivaties
Note: The course matrix might contain more information in Swedish.
I = Introduce, U = Teach, A = Utilize
| I | U | A | Modules | Comment | ||
|---|---|---|---|---|---|---|
| 1. DISCIPLINARY KNOWLEDGE AND REASONING | ||||||
| 1.1 Knowledge of underlying mathematics and science (G1X level) |
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X
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TEN1
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| 1.2 Fundamental engineering knowledge (G1X level) |
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X
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| 1.3 Further knowledge, methods, and tools in one or several subjects in engineering or natural science (G2X level) |
|
X
|
X
|
UPG2
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| 1.4 Advanced knowledge, methods, and tools in one or several subjects in engineering or natural sciences (A1X level) |
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| 1.5 Insight into current research and development work |
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| 2. PERSONAL AND PROFESSIONAL SKILLS AND ATTRIBUTES | ||||||
| 2.1 Analytical reasoning and problem solving |
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X
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UPG2
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| 2.2 Experimentation, investigation, and knowledge discovery |
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| 2.3 System thinking |
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| 2.4 Attitudes, thought, and learning |
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X
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UPG2
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| 2.5 Ethics, equity, and other responsibilities |
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| 3. INTERPERSONAL SKILLS: TEAMWORK AND COMMUNICATION | ||||||
| 3.1 Teamwork |
|
X
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UPG2
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| 3.2 Communications |
|
X
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UPG2
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| 3.3 Communication in foreign languages |
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| 4. CONCEIVING, DESIGNING, IMPLEMENTING AND OPERATING SYSTEMS IN THE ENTERPRISE, SOCIETAL AND ENVIRONMENTAL CONTEXT | ||||||
| 4.1 External, societal, and environmental context |
|
X
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| 4.2 Enterprise and business context |
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| 4.3 Conceiving, system engineering and management |
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| 4.4 Designing |
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| 4.5 Implementing |
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| 4.6 Operating |
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| 5. PLANNING, EXECUTION AND PRESENTATION OF RESEARCH DEVELOPMENT PROJECTS WITH RESPECT TO SCIENTIFIC AND SOCIETAL NEEDS AND REQUIREMENTS | ||||||
| 5.1 Societal conditions, including economic, social, and ecological aspects of sustainable development for knowledge development |
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| 5.2 Economic conditions for knowledge development |
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| 5.3 Identification of needs, structuring and planning of research or development projects |
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| 5.4 Execution of research or development projects |
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| 5.5 Presentation and evaluation of research or development projects |
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