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FINC306 Derivatives

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.

Paper title Derivatives
Paper code FINC306
Subject Finance
EFTS 0.1500
Points 18 points
Teaching period Second Semester
Domestic Tuition Fees (NZD) $846.30
International Tuition Fees (NZD) $4,073.10

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Prerequisite
FINC 202
Schedule C
Commerce
Contact
accountancyfinance@otago.ac.nz
Teaching staff
Professor Jin Zhang
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
Learning Outcomes
  • 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
Graduate Attributes Emphasised
Global perspective, Communication, Critical thinking, Research, Self-motivation.
View more information about Otago's graduate attributes.

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Timetable

Second Semester

Location
Dunedin
Teaching method
This paper is taught On Campus
Learning management system
Blackboard

Lecture

Stream Days Times Weeks
Attend
L1 Thursday 15:00-16:50 28-34, 36-41

Tutorial

Stream Days Times Weeks
Attend one stream from
T1 Tuesday 14:00-15:50 29-34, 36-41
T2 Tuesday 16:00-17:50 29-34, 36-41
T3 Wednesday 14:00-15:50 29-34, 36-41
T4 Wednesday 16:00-17:50 29-34, 36-41