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CM2: Financial Engineering & Loss Reserving
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Module 7
Risk-Neutral Pricing in Discrete Time
1
One-Period Binomial Tree: Risk-Neutral Probability
Construct a one-period binomial tree and calculate the risk-neutral probability.
2
Risk-Neutral Pricing for Derivatives
Explain the role of the risk-neutral probability measure in derivative pricing.
3
Pricing European Options with Binomial Trees
Price a European option using risk-neutral valuation on a multi-period binomial tree.
4
American Option Pricing on a Binomial Tree
Price an American option on a binomial tree, accounting for the early exercise decision.
5
Pricing Derivatives: The Replicating Portfolio Method
Apply the 5-step method to price a derivative by constructing and valuing a replicating portfolio.
6
Dynamic Hedging with Replicating Portfolios
Interpret the composition of the replicating portfolio as a dynamic hedging strategy.
7
Binomial Tree Barrier Option Pricing
Price a barrier option using a binomial tree.
Previous module
Fundamentals of Derivative Securities
Next module
The Black-Scholes-Merton Model