Lectures and seminar discussion
1. Mechanics of futures and forward markets
2. Determination of forward and futures prices
3. Interest rate futures
4. Hedging strategies using futures
5. Swaps and Pricing
6. Mechanics of options markets
7. Credit derivatives, securitization and the credit crisis of 2007
8. Properties of stock options
9. Trading strategies involving options
10. Option pricing: binomial trees
11. Option pricing: Black-Scholes-Merton model
12. Options on stock indices, interest rate and currencies
13. Value at risk, volatility and risk management
14. Derivatives mishaps and lessons learned
At the end of the course, the successful student should be able to:
1. understand different types of derivative securities and specialized financial products, and derivative markets;
2. examine and utilize derivative securities as tools for hedging, arbitrage, speculation and risk management;
3. determine the value of different derivative securities; and
4. analyze the impact of derivative securities on financial markets and lessons learned from derivatives mishaps.
Midterm exam 30%
Case & Project 15-25%
Final Exam 35%
Note: students who do not achieve a grade of at least 50% on the combined exam components will fail the course.
Hull, John C. Fundamentals of Futures and Options Markets, Latest Ed. Prentice Hall Canada (or other textbooks as approved by the Finance Department).
Financial calculator as approved by the department.