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Financial Market Models: Arbitrage and Completeness
This lecture covers the concepts of arbitrage-free and complete financial market models. Topics include computing risk-neutral probabilities, pricing structured notes, constructing equivalent probability measures, and designing risky assets to complete the market. The session also delves into hedging American options, constructing replicating strategies, and pricing European derivatives. Practical exercises involve solving problems related to market completeness, option pricing, and replicating portfolios.
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