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 | Office | |
|---|---|---|
|
Emmanuel D. Hatzakis
|
ehatzaki@stevens.edu |
More Information
Course Outcomes
By the end of this course, the students will be able to:
- Describe how options, futures and swaps function
- Implement option pricing models, such as Black & Scholes and Binomial Trees
- Estimate implied volatility smiles.
- Implement pricing models using binomial trees
- Describe the pros and cons of the use of derivatives for speculative investing
- 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 |