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HA HU1G - Fundamentals of Futures & Options

Faculty
B.V. Phani, Indian Institute of Technology Kanpur

Course Coordinator
ISUP Secretariat

Prerequisite/progression of the course

Students should have completed a corporate finance course.

Course content, structure and teaching

Market fundamentals, Pricing of Futures & forwards, interest rate markets and swaps, mechanics of option markets, stock options. Pricing of stock options.

Topics:

  • Introduction to Derivatives and Derivative Markets
  • Mechanics of Future Markets
  • Pricing of Future and Forwards
  • Hedging Risk using Futures
  • Interest Rate Markets & Swaps
  • Markets for Options
  • Stock Markets and Behavior of Stock Prices
  • Binomial and Black Sholes Pricing Models
The course's development of personal competences

Analytical skills and team work.

Learning Objectives

At the end of the course the student would be familiar with the derivative products of various assets both physical and financial used for hedging strategies of corporate entities. It covers the genesis of these products, product properties and their various applications. It introduces the student to the current institutional setup globally under which they are created and traded. It also elaborates on the various trading strategies which are prevalent in the market.

Teaching methods

Would comprise both direct and case based, cases are used to provide a basis for familiarizing the students with real world application of theoretical concepts taught as part of the course.

Examination

Voluntary mid-term feedback assignment.

Final Exam: 4-hour written exam (closed book), can include multiple choice questions, small problems and case studies.

Exam aids: finance calculator, PC and cheat sheet (provided by the instructor).

Re-take exam: 24-hour written exam.

Recommended literature

Text/References

  • Options Futures & Other Derivatives 7th Edition, John C. Hull

Suggested Cases

  • The Keller Funds Option Investment Strategies, HBS,1995
  • BEA Associates: Enhanced Equity Index Funds, HBS,1994
  • Honeywell, Inc. and Integrated Risk Management, HBS,2000

Suggested Readings

  • Risk Neutral Valuation-A Gentle Introduction, Joseph Tham, http://papers.ssrn.com/sol3/papers.cfm?abstract_id=290044
  • Introduction to Derivative Instruments, HBS Note, 1997
  • The basics of Financial Derivatives, DARDEN Business Publishing
  • Note on Basic Option Properties, HBS Note,2006
  • Note on Forward Contracts and Swaps, HBS Note, 2006
  • Binomial Option Pricing, DARDEN Business Publishing
  • The Black-Scholes Option Pricing Model, DARDEN Business Publishing

Suggested Weblinks


Sidst opdateret af ISUP Secretariat 29.01.2010