Financial Derivatives

Paper Code: 
MFM 425
Credits: 
4
Contact Hours: 
60.00
Max. Marks: 
100.00
Objective: 

Course Objectives-

  • To enable students to have a detailed understanding of the special characteristics of derivatives including forwards, futures, swaps, options and others, and their relationship to the underlying cash securities.
  • To be able to use these instruments to address a wide range of trading and investment objectives.
  • To understand and be able to control the risks of financial derivatives and derivatives portfolios.

 

Course Outcomes(COs):

Course

Learning outcomes (at course level)

Learning and teaching strategies

Assessment Strategies

Paper Code

Paper Title

MFM 425

Financial Derivatives

CO169: Describe and explain the fundamental features of a range of key financial derivative instruments

CO 170: Acquire knowledge of pricing of  forward contracts, futures contracts, swaps and options .

CO 172: Understand the usage of derivative instruments to address a wide range of trading and investment objectives.

CO 173: Examine the different methods to control the risks of financial derivatives and derivatives portfolios.

CO 174: Create awareness about various trading Strategies involving Futures, Options and Swaps.

CO175:To understand the various concepts of pricing options.

Approach in teaching:

Interactive Lectures, Group Discussion, Tutorials, Case Study

 

 

Learning activities for the students:

Self-learning assignments, presentations

Class test, Semester end examinations, Quiz, Assignments, Presentation

 

 

12.00
Unit I: 
Brief history and background of derivatives

Brief history and background of derivatives

Evolution of Commodity, Currency, Stocks and Interest Rate Derivatives. Structure of derivative markets- Exchange traded market sand Over the counter markets, forwards, futures, options, swaps and other derivative contracts. Types of traders: Hedgers, Speculators and Arbitragers. Overview of Indian Derivatives Market.

12.00
Unit II: 
Mechanics of Derivatives market

Mechanics of Derivatives market

Contract specification, Exchange clearing, Settlement and margins system, Types of traders and types of orders, Regulation, reasons for trading: risk management, speculation and arbitrage

12.00
Unit III: 
Pricing Derivatives

Pricing Derivatives

Investment assets v/s consumption assets, short selling, cost of carry model, Forward price of an investment asset, valuing forward contracts, Futures price of stock indices, currencies, commodities, interest rate futures, relationship between futures and spot price.

12.00
Unit IV: 
Trading Strategies involving Futures, Options and Swaps

Trading Strategies involving Futures, Options and Swaps

Hedging strategies using futures, basic option trading strategies, Currency and interest rate swaps.

12.00
Unit V: 
Option Pricing

Option Pricing

Factors affecting option prices, intrinsic value and time value of

options, put call parity, Pricing options: Black and Scholes model, binomial option pricing-one step.

Essential Readings: 

Books Recommended:

  • John C.HullOptions,FuturesandOtherDerivatives,EighthEdition,PearsonEducation,2011.
  • S.Kevin,CommodityandFinancialDerivatives,SecondEdition,PHILearningPvt.Ltd.,2014.
  • SSSKumar,FinancialDerivatives, PHILearning, 1st Edition,2010.
  • S.L Gupta,FinancialDerivativesTheory,ConceptsandProblems,SecondEdition,PHI.2017
  • RajivSrivastava,DerivativesandRiskManagement,SecondEdition,OxfordUniversityPress,2014.
  • Robert W.Kolb,Futures,Options,andSwaps,3rd edition,BlackwellPublishers,200.
  • AlfredSteinherr,DerivativesTheWildBeastofFinance:APathtoEffectiveGlobaisation(WileyInvestment Series), 2000.
  • Economics Times
  • Financial Times
  • NSE Report

 

Academic Year: 
2021-2022
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