Course description:
The main focus of this course is the modelling of the interest rates while other asset classes
like foreign exchange and inflation are also covered. Ultimately, after completing the course,
the student should be able to build a multi-asset portfolio consisting of linear products and
perform xVA (CVA, BCVA and FVA) and (H)Value-at-Risk computations.
Expected prior knowledge:
Basic knowledge of stochastic differential equations (SDEs), numerical methods for Monte
Carlo simulation, linear algebra and basic knowledge of Python programming. Prior to this
course, it is highly recommended to follow the course of Computational Finance (available
here).
Workload: The course consists of 14 lectures, and each lecture is divided into 45m-1h blocks.
The whole course consists of 32 blocks. Homework assignments are given at the end of each
lecture.
Content of the Course:
Lecture 1- Introduction and Overview of the Course
Lecture 2- Understanding of Filtrations and Measures
Lecture 3- The HJM Framework
Lecture 4- Yield Curve Dynamics under Short Rate
Lecture 5- Interest Rate Products
Lecture 6- Construction of Yield Curve and Multi-Curves
Lecture 7- Pricing of Swaptions and Negative Interest Rates
Lecture 8- Mortgages and Prepayments
Lecture 9- Hybrid Models and Stochastic Interest Rates
Lecture 10- Foreign Exchange (FX) and Inflation
Lecture 11- Market Models, Convexity Adjustments and Beyond
Lecture 12- Valuation Adjustments- xVA (CVA, BCVA and FVA)
Lecture 13- Historical VaR, SVaR and Expected Shortfall
Lecture 14- Summary of the Course