The course will provide the students with knowledge about different strategies involving derivative markets. Usual speculative and hedging strategies will be analyzed. At the end of this course the student must be able to: - Know the advantages and drawbacks associated with every financial instrument, depending on the investor profile and objectives. - Have a perfect understanding about the notion of hedging strategy, along with its advantages and shortcomings. - Use derivatives so as to speculate and hedge. - Use derivatives with other purposes. - Obtain information about prices, volumes, and other parameters in order to price and compose different portfolios with different objectives. - Measure risk levels. In the course we will also analyze: - Complex problems involving fixed income securities and derivatives. - Relationships with other courses of Finance and Accounting. Finally: - Collaboration with other students will be stimulated, so as to deal with complex practical problems. - Discussions and critic analyses will be provoked. - The use of static and dynamic approaches will be encouraged.

First part. Futures 1) Forwards and futures. 2) Arbitrage and pricing.. 3) Leverage ratio. 49 Dealing with practical issues. Second part. Options 1) Call and put options. 2) Put/call parity. 3) Replicas and arbitrage. 4) Future options. 5) Dealing with practical issues. Third part. Binomial model. 1) Model assumptions. 2) Arbitrage and risk-neutral probabilities. 3) Pricing rule. 4) American options. Optimal stopping time. Fourth part. Introducing the Black-Scholes model. 1) Black-Scholes formulae. 2) Greeks: Delta, Gamma, Rho and Vega. 3) Delta hedging.

Methodology will include: (1) Lectures, in order to present the main ideas of every topic. (2) The use of the computer. (3) Numerical exercises. (4) More complicated practical situations that will be analyzed by teams of three/four students. (5) In this course students can use Artificial Intelligence tools without any kind of restriction. However, it is reminded that no access to any type of computer will be available during the exams.