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    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 ) $937.50
    International Tuition Fees Tuition Fees for international students are elsewhere on this website.
    FINC 202
    Schedule C

    Teaching staff

    Dr Beam Aschakulporn

    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

    Derivatives Markets, 3rd edition, by McDonald, Robert L., 2013 (Pearson Higher Education, Inc.).
    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


    Semester 2

    Teaching method
    This paper is taught On Campus
    Learning management system


    Stream Days Times Weeks
    L1 Tuesday 15:00-15:50 29-35, 37-42
    Thursday 15:00-16:50 29-35, 37-42


    Stream Days Times Weeks
    Attend one stream from
    T1 Tuesday 16:00-16:50 30-35, 37-42
    T2 Wednesday 14:00-14:50 30-35, 37-42
    T3 Wednesday 15:00-15:50 30-35, 37-42
    T4 Wednesday 16:00-16:50 30-35, 37-42
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