Please note that this description was taken from Fall 2012. New information will be posted when available.

COURSE NUMBER: EWMBA 237-1

COURSE TITLE: Financial Derivatives

UNITS OF CREDIT: 3

INSTRUCTOR: Nicolae Garleanu

E-MAIL ADDRESS: garleanu@haas.berkeley.edu

CLASS WEB PAGE LOCATION: bSpace

MEETING DAY(S)/TIME: Monday 6:00 p.m. to 9:30 p.m.

PREREQUISITE(S):It will be assumed that students are familiar with the material covered in the core courses. In addition, the course requires familiarity with a software package that can be used for numerical computation. (Excel is probably the easiest, but Matlab, Mathematica, etc. would also work.)

CLASS FORMAT: lectures and short cases

REQUIRED READINGS: lecture notes, additional material posted on line; textbook readings recommended

BASIS FOR FINAL GRADE: The course grade will be based almost exclusively on a set of three examinations. Problem sets will also be assigned, though, to help you check your understanding.

ABSTRACT OF COURSE'S CONTENT AND OBJECTIVES:
This course presents and analyzes derivatives, such as forwards, futures, swaps, and options. These instruments have become extremely popular investment tools over the past 30-40 years, as they allow one to tailor the amount and kind of risk one takes, be it risk associated with changes in interest rates, exchange rates, stock prices, commodity prices, default probabilities, in ation, etc. They are used by institutions as well as investors, sometimes to hedge (reduce) unwanted risks, sometimes to take on additional risk motivated by views regarding future market movements.

The course de
nes the main kind of derivatives, shows how they are used to achieve various hedging and speculating objectives, introduces a framework for pricing derivatives, and studies several applications of derivative-pricing techniques outside derivative markets. The main topics covered are

· Pricing derivatives: no arbitrage and the law of one price;

· Forwards, futures and swaps | pricing and applications;

· Options | pricing and applications. Both European- and American-style options are studied, in the context of the binomial model as well as in that of the Black-Scholes model.

· Hedging: implementation details;

· Further applications: real options, corporate securities;

· Other derivatives: collateralized securities (e.g., mortgage-backed securities), credit derivatives

· Other topics: Value at Risk (VaR), Monte-Carlo simulation

BIOGRAPHICAL SKETCH:
After obtaining his PhD in Finance from the Stanford GSB, Professor Garleanu taught at INSEAD and Wharton before moving to Haas in 2007. At Haas, he has taught the core finance course in the full-time MBA program, the financial-derivatives course in the full-time end evening programs, and modules on derivatives and on risk management in the IMCA executive program.

Professor Garleanu's research studies theoretically the determinants of asset prices. Thus, his papers investigate the average equity-market return in excess of bond returns, the difference in returns between growth and value stocks, apparent systematic anomalies in the prices of options, the effect of liquidity in  over-the-counter markets,  the impact of trader funding constraints, and others. His papers have been published in top scholarly journals including Econometrica, the Review of Financial Studies, the Journal of Financial Economics, and the Journal of Economic Theory.