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2. Student learning outcomes

· Be able to gain intuition and skills for understanding a different class of derivatives.
· Be able to understand the pricing mechanism of derivatives and as a tool for hedging.
· Be able to understand the use of these instruments for risk management.
3. Text Books and Reading materials

Text Books

· Options, Futures, and Other Derivatives – John Hull and Sankarshan Basu.
· Introduction of derivatives and risk management – Don M Chance and Robert Brooks.
· An introduction to the mathematics of financial derivatives – Salih N. Neftci.
· Financial derivatives: Pricing and Risk Management – Robert Kolb and James A. Overdahl.

Reading Materials and Cases

4. Tentative Session Plan

Session Number	Topics/Activities	Reading/case list etc. (John C. Hull)
1.	This session will introduce to the World of Derivatives – Challenges and Opportunities.	Chap. 1 (Introduction)
2.	This session will introduce the Derivatives market in India – New Changes and regulations	Visit SEBI and NSE websites.
3.	This session will cover the discussion on the interest rate, forward rate, and the term structure of interest rate.	Chap. 4 (Interest rates)
4 & 5.	These sessions will cover discussion on the Forward contracts, pricing of the commodity forward contracts, interest rate forwards, and non-deliverable forward contracts.	Chap. 5 (Determination of forward and futures prices)
6.	This session covers the futures contract, specification of the futures contract, margins and marking-to-market, types of orders	do
7.	Hedging strategies with futures: Basis risk, hedge ratio, hedging effectiveness	Chap 3. (hedging strategies using futures)
8 & 9.	Hedging with a single stock, speculation using stock futures, stock index futures and its pricing mechanism, portfolio insurance using index futures	Chap. 5 (Determination of forward and futures prices)
10 & 11.	Discussion on Interest rate futures, cheapest to delivery bonds, the pricing of bond futures and fixed income portfolio management Case Study	Chap 6. (Interest rate futures)
12.	This session discusses the fundamentals of option contracts	Chap 8. (Mechanics of Option mark).
13.	This session discusses put-call parity and option trading strategies (e.g., covered call, straddle, strangle, synthetics, etc.)	Chap. 9 & 10 (Prop. Of options, Trading Strat. Involving options)
14.	Discussion on Binomial Option pricing model	Chap. 11 (Binomial Trees)
15.	Discussion on the famous Black Scholes and Merton formula and its importance and intuition behind BSM	Chap. 13 (The BSM Model)
16.	This session discusses on Option Greeks, delta -gamma hedging and a brief discussion on Exotics	Chap. 17 (The Greeks)
17.	Case study discussion	Will be provided
18 & 19.	These sessions cover discussion on Swap contracts, interest rate swaps, Swaptions, and currency swaps.	Chap 7. (Swaps)
	A look back session
20.

Note: the chapter numbers may differ in new prints

5. Evaluation

· Midterm Quiz 1 20%
· Midterm Quiz 2 20%
· Assignment/Project 10%
· Final term 40%
· Class participation 10%

6. Academic Integrity

· Students need to demonstrate a high order of academic integrity and discipline in the classroom/Via Zoom.
· Students are required to regularly read the reading materials inclusive of case studies and come prepared to class so that they contribute to the overall development of self and academia.
· Students should avoid using unfair practices during the evaluation process (Check details in the manual of policies).

Created By: Alora Kar on 09/01/2020 at 10:59 AM
Category: BM 19-21 T-V Doctype: Document