Business Topics Course: Financial Market Volatility Modeling

Catalog description

The most fascinating aspect of financial market prices is how they change. The uncertainty or risk related to the size of changes in prices is referred to as financial volatility. Volatility can present significant investment risk, when correctly harnessed. It can generate solid returns for shrewd investors. It is also a tradable market instrument in itself. Even when markets are choppy, crash, or surge, there can be opportunity. In this course, students will learn how to measure and forecast financial volatility. They will study historical volatilities, exponential smoothing, ARCH/GARCH models, high frequency stochastic volatility models and implied volatilities from options. These tools will be applied to measuring risk, analyzing alternative approaches to calculating Value at Risk, measuring and forecasting correlations, solving the problem of dynamic portfolio selection, risk control and trading. Prereq: Foundations of Finance and a familiarity with simple probability and statistics including least squares regression. Programing experience will be preferred. Fulfillment: This course satisfies BUSF Finance/non-Finance elective; BUSM Non-Marketing elective; Business Analytics Track; IMB Business elective.