FIN 628 Derivatives


Course Catalog Description

Introduction

This course covers the fundamentals of financial derivatives, including the basic properties and the pricing of futures, options and swaps. It also explores trading and hedging strategies involving financial derivatives. Special topics, such as exotic options and credit derivatives, are explored. The course provides the foundation of financial derivatives and lays the ground for a rigorous risk management course and other advanced quantitative courses, such as stochastic finance.

Prerequisites: FIN 623


Campus Fall Spring Summer
On Campus X X
Web Campus X X

Instructors

Professor Email Office
Emmanuel D. Hatzakis
ehatzaki@stevens.edu

More Information

Course Outcomes

By the end of this course, the students will be able to:

  1. Describe how options, futures and swaps function
  2. Implement option pricing models, such as Black & Scholes and Binomial Trees
  3. Estimate implied volatility smiles.
  4. Implement pricing models using binomial trees
  5. Describe the pros and cons of the use of derivatives for speculative investing
  6. Design and implement portfolio trading and hedging strategies using derivatives

Course Resources

Textbook

  • Options, Futures and Other Derivatives, 10th Edition, John C. Hull, Pearson. ISBN-13: 978-0134472089

Grading

Grading Policies

Weights
1 Homeworks and Quizzes 20%
2 Class attendance 10%
3 Class participation 10%
4 Final Exam 35%
5 Final Group Project 25%

Lecture Outline

Topic Readings Assignments
Week 1 Introduction to financial derivatives Chapter 1
Week 2 Forwards and Futures Chapters 2,3
Week 3 Trading Futures, Interest Rate Futures (if time permits) Chapters 5, 6 (if time permits) Homework Problems on Futures
Week 4 Swaps & The Financial Crisis Chapters 7, 8 (Selected topics)
Week 5 Midterm 1 Option markets and the properties of equity options Chapter 10
Week 6 Option markets and the properties of equity options Chapter 11 Homework Problems on equity options properties, i.e. 9.3, 9.7, 9.10, 9.14, 9.16
Week 7 Trading strategies with Options Chapter 12 Homework Problems on Trading strategies using options, i.e. 10.4, 10.8, 10.10, 10.12, 10.16
Week 8 Option Pricing: Binomial Model Chapter 13, 14(if time permits) Homework Problems on the Binomial Model, i.e. 11.1, 11.4, 11.9, 11.12, 11.13, 12.13
Week 9 Option Pricing: Black-Scholes Model Chapter 15 Homework problems on Black and Scholes, i.e. 13.4, 13.7, 13.8, 13.14, 13.15, 13.21
Week 10 Midterm 2 Volatility Smile Chapter 20
Week 11 Options with Stock Indices, Currencies and Futures Chapter 17 Homework problems on Derivatives on Equity Indices and Currencies, i.e. 15.3, 15.7, 15.12, 15.17,15.18,15.25
Week 12 The Greeks Chapter 19
Week 13 Hedging strategies using options TBA
Week 14 Special Topics: Exotic options, Credit Derivatives Topics from Chapters 25, 26 (Selected topics if time permits) Final Project Due*
Week 15 Final Exam