Overview
A comprehensive analysis of the properties of options and futures, offering a no-arbitrage theoretical framework within which all derivatives can be valued and hedged.
Derivative securities are the most rapidly growing area in the global financial market. In 2010, the notional global market value of derivatives was USD 605 trillion, 10 times world GDP. That of primary financial assets was only twice world GDP. Given the large, growing size of the derivative market, a careful study of derivative securities becomes very important to a financial analyst.
About this paper
| Paper title | Derivatives |
|---|---|
| Subject | Finance |
| EFTS | 0.15 |
| Points | 18 points |
| Teaching period | Semester 2 (On campus) |
| Domestic Tuition Fees ( NZD ) | $1,053.30 |
| International Tuition Fees | Tuition Fees for international students are elsewhere on this website. |
- Prerequisite
- FINC 202
- Schedule C
- Commerce
- Contact
- Teaching staff
- Paper Structure
- Topics covered:
- Simple arbitrage relationships for forward and futures contracts
- Hedging and basis risk
- Stock index futures
- Swaps
- Trading strategies involving options
- Valuation of options using a binomial model and the Black-Scholes formula
- Financial engineering
- Security design
- Textbooks
Derivatives Markets, 3rd edition, by McDonald, Robert L., 2013 (Pearson Higher Education, Inc.).
or
Fundamentals of Derivatives Markets, by McDonald, Robert L., 2009 (Pearson Education, Inc.).- Course outline
- View the course outline for FINC 306
- Graduate Attributes Emphasised
- Global perspective, Communication, Critical thinking, Research, Self-motivation.
View more information about Otago's graduate attributes. - Learning Outcomes
Students who successfully complete this paper will:
- Understand the concepts of forward and futures contracts and how to price them using no-arbitrage principle
- Understand the concept and pricing of swaps
- Price options using binomial tree method
- Price options using Black-Scholes formula
- Analyse the derivatives embedded in structured products
- Assessment details
Assignments (20%)
Mid-Term exam (25%)
Participation (5%)
Final exam (50%)
Overview
A comprehensive analysis of the properties of options and futures, offering a no-arbitrage theoretical framework within which all derivatives can be valued and hedged.
Derivative securities are the most rapidly growing area in the global financial market. In 2010, the notional global market value of derivatives was USD 605 trillion, 10 times the world GDP. That of primary financial assets was only twice world GDP. Given the large, growing size of the derivative market, a careful study of derivative securities becomes very important to a financial analyst.
About this paper
| Paper title | Derivatives |
|---|---|
| Subject | Finance |
| EFTS | 0.15 |
| Points | 18 points |
| Teaching period | Semester 2 (On campus) |
| Domestic Tuition Fees | Tuition Fees for 2027 have not yet been set |
| International Tuition Fees | Tuition Fees for international students are elsewhere on this website. |
- Prerequisite
- FINC 202
- Schedule C
- Commerce
- Contact
- Teaching staff
- Paper Structure
Topics covered:
- Simple arbitrage relationships for forward and futures contracts
- Hedging and basis risk
- Stock index futures
- Swaps
- Trading strategies involving options
- Valuation of options using a binomial model and the Black-Scholes formula
- Financial engineering
- Security design
- Textbooks
McDonald, R. L. (2012). Derivatives Markets (3rd ed.). Pearson.
or
McDonald, R. L. (2008). Fundamentals of Derivatives Markets. Pearson.
- Course outline
- View the course outline for FINC 306.
- Graduate Attributes Emphasised
- Global perspective, Communication, Critical thinking, Research, Self-motivation.
View more information about Otago's graduate attributes. - Learning Outcomes
Students who successfully complete this paper will:
- Understand the concepts of forward and futures contracts and how to price them using no-arbitrage principle.
- Understand the concept and pricing of swaps.
- Price options using binomial tree method.
- Price options using Black-Scholes formula.
- Analyse the derivatives embedded in structured products.