• Deterministic Cash Flows: Interest, present and future value, internal rate of return.
• Fixed Income Securities: Bonds, prices and yields, duration, immunization, term structure of interest rates.
• Random Cash Flows: Asset return, portfolio return, random returns, portfolio mean return and variance, diversification, portfolio diagram, feasible set, Markowitz model, Two fund theorem, One fund theorem.
• Capital Asset Pricing Model: Capital market line, CAPM, betas of stocks and portfolios, Security market line, Use of CAPM in investment analysis and as a pricing formula.

• Forwards and Futures: Forward and futures prices and values, hedging, stock index futures, currency futures.
• Options: Factors influencing options premia, Put-call parity, Binomial option pricing model (BOPM), dynamic hedging, pricing of American options.
• Black-Scholes Model: Modelling of stock prices, analogy with BOPM, delta hedging, hedging parameters – “The Greeks”.
• Option Spreads: Spreads, butterflies, straddles, and strangles.
• Value at Risk (VaR): Estimating VaR by linear and quadratic models, Monte Carlo Simulation.

• Calculus: Partial derivatives, Lagrange multipliers method for optimization
• Basic Probability
• Random variables: Discrete and continuous random variables, expectation and variance, binomial, normal, and lognormal variables.
• Multivariate distributions: Conditional probability and distributions, independence, covariance, conditional expectation.
• Sampling: Sample mean and variance, large sample approximations, data fitting.

Extensive practical work on MS Excel. (No prior knowledge of MS Excel is needed.)