ISCTE-IUL > Education > MMF

Modelos, Estrutura Temporal E Taxa De Juro (1 º Sem 2017/2018)

Code:	M7605
Acronym:	M7605
Level:	2nd Cycle
Basic:	No
Teaching Language(s):	Portuguese
Friendly languages:

Be English-friendly or any other language-friendly means that UC is taught in a language but can either of the following conditions:
1. There are support materials in English / other language;
2. There are exercises, tests and exams in English / other language;
3. There is a possibility to present written or oral work in English / other language.

Semester	ECTS Credits	Theoretical Lesson (T)	Theoretical and Pratical Lesson (TP)	Practical and laboratorial lesson (PL)	Seminary (S)	Field Work (TC)	Training Period (E)	Tutorial Orientation (OT)	Contact Hours	Autonomous Work	Others (O)	Total Load Hours [?]Contact Hours + Autonomous Work
1	6.0	10.0 h/sem	15.0 h/sem	0.0 h/sem	0.0 h/sem	0.0 h/sem	0.0 h/sem	0.0 h/sem	25.0 h/sem	143.0 h/sem	0.0 h/sem	168.0 h/sem


Since year	2017/2018
Pre-requisites	None
Objectives	The course is devoted to the pricing of interest rate derivatives under stochastic interest rate models. Nevertheless, the first classes will be devoted to the study of stochastic volatility models. By the end of the course, each student should be able to use different term structure models to price or hedge various types of interest rate contingent claims.
Program	1. Alternatives to the Black-Scholes model: volatility smiles a. CEV model b. Heston (1993) model 2. Term structure of interest rates a. Bond markets b. Spot interest rates, forward interest rates and discount factors c. Valuation of fixed-rate bonds d. Yield-to-maturity e. Valuation of floating-rate bonds f. Estimation of the spot yield curve i. Bootstraping ii. Nelson-Siegel (1987) g. Duration and imunization 3. Equilibrium models a. Vasicek (1977) b. CIR (1985) c. Multi-factor CIR model d. General Framework of Duffie-Kan (1996) e. Stochastic duration 4. No-arbitrage models a. HJM models b. No-arbitrage condition c. Hull-White (1990) specification d. Gaussian HJM model: valuation of futures and options e. Market Models i. Lognormal LIBOR market model: caps, floors and collars ii. Jamshidian model: swaptions
Evaluation Method	Regular grading system: - One individual exam (90%) - Individual assessment cases, attendance and active participation (10%) Students that fail or want to improve their grade in the regular grading system have one additional moment to pass: a re-sit exam, that is worth 100% of the final grade. In any of the evaluation systems (regular or re-sit exam) it is considered that a student has course approval if he has a grade equal or above 9.5 points.
Teaching Method	The student should acquire analytical, information gathering, written and oral communication skills, through the following learning methodologies (LM): 1. Expositional, to the presentation of the theoretical reference frames 2. Participative, with analysis and resolution of application exercises 3. Active, with the realization of individual works 4. Self-study, related with autonomous work by the student, as is contemplated in the Class Planning.
Observations	None
Basic Bibliographic	- Textos de Apoio teórico/práticos a facultar pela equipa docente durante o trimestre; - Artigos cientificos a facultar pela equipa docente durante o trimestre.
Complementar Bibliographic	Björk, T., 2009, Arbitrage Theory in Continuous Time, 3rd edition, Oxford University Press. Brigo, D. and F. Mercurio, 2006, Interest Rate Models - Theory and Practice: With Smile, Inflation and Credit, 2006, 2nd edition, Springer. James, J, and N. Webber, 2000, Interest Rate Modelling: Financial Engineering, Wiley. Lamberton, D. and B. Lapeyre, 2007, Introduction to Stochastic Calculus Applied to Finance, 2nd edition, Chapman & Hall. Musiela, M. and M. Rutkowski, 2011, Martingale Methods in Financial Modelling, 2nd edition, Springer. Rebonato, R., 1998, Interest-rate Option Models, John Wiley & Sons, 2nd edition. Shreve, S., 2004, Stochastic Calculus for Finance II: Continuous-Time Models, Springer.