Quantitative Finance

Knowledge:

• Dynamic hedging, model risk and the Fundamental Theorem of Derivative Trading
• Dividends and foreign exchange models
• Selected advanced for option pricing topics, eg: Local volatility and the Dupire formula, stochastic volatility ala Heston, jumps ala Merton; American options, barrier options, volatility derivatives.  

Skills:

• Design, conduct and analyze simulation-based hedge experiments
• Derive no-arbitrage conditions models with dividends, multiple currencies, stochastic interest rates, or a non-traded underlying asset.  
• Use a variety of techniques for option pricing in advanced settings (change of numeraire, affine methods, Ito formula extensions, Longstaff-Schwartz simulation, ...) 

Competencies:

1. Confidence in using continuous-time finance models to analyze problems and models that go (well) beyond the basic “call-option in Black/Scholes”-case. The confidence is obtained by working through (fairly) specific specific examples rather than “abstract nonsense”.
2. Producing “sensible numbers” from the continuous-time models; the numbers may arise from implementation of specific numerical algorithms, from well-designed experiments, or from empirical analysis.
3. Ability to read original research papers in finance journals, both broad academic journals such as Journal of Finance, technical journals such as Mathematical Finance, or applied quantitative journals such as Journal of Derivatives.