(LO1) Understand the assumptions of CAMP, explain the no riskless lending or borrowing and other lending and borrowing assumptions, be able to use the formulas of CAMP, be able to derive the capital market line and security market line
(LO2) Describe the Arbitrage Theory Model (APT) and explain its assumptions, perform estimating and testing in APT
(LO3) Be able to explain the terms long/short position, spot/delivery/forward price, understand the use of future contracts, describe what a call/put option (European/American) is and be able to makes graphs and explain their payouts, describe the hedging for reducing the exposure to risk, be able to explain arbitrage, understand the mechanism of short sales
(LO4) Explain/describe what arbitrage is, and also the risk neutral probability measure, explain/describe and be able to use (perform calculation) the binomial tree for European and American style options
(LO5) Understand the probabilistic interpretation and the basic concept of the random walk of asset pricing
(LO6) Understand the concepts of replication, hedging, and delta hedging in continuous time
(LO7) Be able to use Ito's formula, derive/use the Black‐Scholes formula, price contingent claims (in particular European/American style options and forward contracts), be able to explain the properties of the Black‐Scholes formula, be able to use the Normal distribution function in numerical examples of pricing
(LO8) Understand the role of Greeks , describe intuitively what Delta, Theta, Gamma is, and be able to calculate them in numerical examples.