FE680 Advanced Derivatives

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Course Catalog Description


Campus Fall Spring Summer
On Campus X X
Web Campus X X


Professor Email Office
Dragos Bozdog
dbozdog@stevens.edu Babbio 429A
Cristian Pasarica

More Information

Course Description

This course will address practical and theoretical issues for interest rate models, credit models, and hybrid instruments.

In the first part of the course we will discuss the methodology and principles behind Interest rate models: Hull White , HJM, Markovian HJM models. Mortgage derivatives and prepayment models will be discussed as an application of the interest rates models.

The second part of the course will be focused on credit models: building discount curves for credit models estimation of default probability and credit spread from equity prices. We will discuss Gaussian copula model, base correlation and CVA. Hybrid Securities will be introduced and modeling issues will be discussed.

Course Resources


Antoon Pelsser, Efficient Methods for Valuing Interest Rate Derivatives, Springer

(ISBN 978-1-85233-304-1)

Dominic O'Kane, Modelling Single-name and Multi-name Credit Derivatives, Wiley

(ISBN: 978-0-470-51928-8)

Jan De Spiegeleer, Wim Schoutens, Cynthia Van Hulle, The Handbook of Hybrid Securities: Convertible Bonds, CoCo Bonds and Bail-In, Wiley (ISBN: 978-1-118-44999-8)

Additional References

John Hull. Options, Futures, and Other Derivatives. 2012. Eighth Edition. Prentice Hall. ISBN: 978-0132164948


Grading Policies

Assignments 40%

Midterm 30%

Final 30%

Lecture Outline

Topic Reading
Week 1 Introduction to Financial Engineering Ch. 1 and 2
Week 2 Capital Markets Overview Ch. 3
Week 3 Corporate Finance & Valuation Ch. 3
Week 4 Equity Analysis Ch. 4
Week 5 Fixed Income Debt Securities Ch. 4
Week 6 Overview of Bonds Sectors & Instruments Ch. 4
Week 7 Valuation of Debt Securities Ch. 4
Week 8 Securitized Products
Week 9 Leveraged Loans & CLO's Ch. 5
Week 10 General Principles of Credit Analysis Ch. 5
Week 11 Foreign Exchange Ch. 6
Week 12 Poisson Processes and Jump Diffusion Ch. 11
Week 13 Exotic Options Ch. 7
Week 14 Review & Catch-up