The aim of the lecture is to fill in the gaps between textbook quantitative finance and industry practice. In particular, the emphasis will be on how theory and quantitative models are used in derivatives trading every day. The course covers single and multifactor vanilla and exotic options along with typical models and their limitations, which are described in numerous case studies.
The students will learn how a (equity) derivatives trading desk operates in practice, how models are used and how model deficiencies are hedged out. Moreover, commonly used market instruments are introduced and explained.