Economics of Derivatives

This course provides students with a thorough introduction to the theoretical and practical aspects of forwards, futures, options, and other derivative instruments. Derivatives are important tools in financial markets, and students will learn how to price, value, hedge and apply them in practical settings. This course is particularly important for students seeking to work in finance. Topics covered include no arbitrage-based pricing, the pricing of forwards and futures, interest rate products and commodities, valuation based on market prices, and option pricing and strategies. Prerequisite: 440.601 Microeconomic Theory. Co-requisites are 440.606 Econometrics and 440.640 Financial Economics.

Perhaps the best way to begin this course is with the introductory videos on the course Blackboard site. More details are provided in the course syllabus and detailed notes and problems (with solutions) are available in the Readings and Coursepack. In addition to the Readings and Coursepack, this course will make extensive use of PowerPoint slides and various spreadsheets. Other useful information and links are provided below and in Teaching and Courses. Students are encouraged to contact the instructor about any questions or problems that they encounter. Numerous problems and exercises with solutions are available through links below to the Readings and Coursepack, Sample Exams and Additional Problems

Students should not attempt this course with an insufficient quantitative background (including comprehension of subject material from linear mathematics, statistics and freshman-year calculus). If you took a math refresher course after entering JHU, you should find the course sufficient for purposes of this course. If not, or you wish to ensure that your math skills are sufficient, read through the Preliminaries and Review document. At least glance through this document to make sure that you do not require further review. It should be useful for this course, targeted for this course, maintaining the same notation, etc. If your background is too rusty for even this document, then you have quite a bit of work to quickly accomplish by the second week of class. Very elementary prerequisite work is available through the Elementary Mathematics Review link. Other useful information for this course and links are provided in the course syllabus below and in my page for Teaching and Courses. Contact information is listed on the course syllabus.

Course Syllabus Exam Preparation Suggestions Useful Links for  Students
Readings and Coursepack Sample Exams Videos
Projects Elementary Mathematics Review Finance Reading Suggestions
Additional Problems Spreadsheets and Other Tools Slides
Additional Readings Lecture Spreadsheets
Send an e-mail to John Teall

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updated 01/10/2021