QF430 Introduction to Derivatives
Course Catalog Description
Introduction
This course introduces students to financial derivatives. Common derivative securities such as forwards, futures, swaps, and options are discussed. Students learn how investors use derivative securities, how traders and market makers price and hedge their exposure to these securities, and how financial institutions and regulators maintain orderly markets in derivative securities. This is a general introduction to derivatives and does not discuss exotic securities or advanced numerical techniques.
The course is mostly lecture based relying heavily on the textbook. Students are expected to learn terminology and institution details as well as quantitative skills in pricing derivative securities. No prior knowledge of derivatives is expected. Students are expected to be familiar with time value of money concepts and investments or corporate finance. Some parts of the course require mathematics such as calculus, differential equations, and numerical methods. Students need to be able to perform mathematical programing.
Campus  Fall  Spring  Summer 

On Campus  X  X  
Web Campus  X  X 
Instructors
Professor  Office  

Anand Goel

agoel2@stevens.edu  Babbio 635 
More Information
Course Outcomes
After successful completion of this course, students will be able to:
 Understand and compare uses of different derivative securities
 Distinguish between equilibrium pricing and absenceofarbitrage pricing
 Price common derivative securities
 Explain institutional features of derivatives markets and regulation
 Avoid misconceptions about derivatives and misuses of derivatives
Course Resources
Textbook
Fundamentals of Futures and Options Markets, John C. Hull, Pearson, Ninth Edition. ISBN: 9780134083247
Solutions Manual: Student's Solutions Manual and Study Guide for Fundamentals of Futures and Options Markets, 9th Edition ISBN: 9780134083650.
Additional electronic resources (articles or cases) may be recommended during the course.
Grading
Format and Structure
 Lectures will cover theory and examples.
 Students will solve problems from the textbook, but these will not be collected or graded.
 Students will submit assigned problem sets which will be graded.
 Students will work on mathematical / programming assignment.
Course Requirements
Attendance: Attendance will be taken in most but not necessarily all sessions. Credit for attendance will be proportional to the number of sessions attended or excused by instructor based on unavoidable circumstances communicated in a timely manner.
Problem Sets: Problem sets are due at class start time on the days indicated in the schedule and will be made available three class sessions before due date.
Team Projects: Details to be provided later.
Exams: There will be a Midterm exam based on the material covered up to Midterm. There will be a Final exam based on everything covered in the class but with a heavy emphasis on material covered after Midterm. The exams will consist of numerical problems and conceptual questions requiring short answers.
Grading Policies
Grades will be based on:
Attendance  5%
Problem Sets  30%
Team Projects  15%
Midterm Exam  25%
Final Exam  25%
Late Policy Problem sets and team project late by less than 24 hours will be penalized 10%. There will be no credit for submissions that are late by more than 24 hours. Exceptions are unlikely but if you face a special circumstance, contact the instructor as soon as possible.
Lecture Outline
Tentative Course Schedule
 The schedule may be revised as the term progresses. Some topics may be omitted. Students will be informed of any revisions in class and through the course website.
 The readings refer to textbook chapter numbers and must be read in advance.
 Problem sets are due at class start time and will be assigned three class sessions before due date.
Session  Topic  Reading 

1  Introduction  Chapter 1 
2  
3  Futures markets  Chapter 2 
4  
5  Hedging with futures  Chapter 3 
6  
7  Interest rates  Chapter 4 
8  
9  Forward and futures prices  Chapter 5 
10  
11  Interest rate futures  Chapter 6 
12  Swaps  Chapter 7 
13  
14  Securitization  Chapter 8 
15  Midterm  
16  Options markets  Chapter 9 
17  Stock options properties  Chapter 10 
18  Financial engineering with options  Chapter 11 
19  Binomial trees  Chapter 12 
20  Random variables  
21  Weiner processes  
22  BlackScholesMerton equation  Chapter 13 
23  Riskneutral pricing  
24  Numerical valuation  Chapter 18 
25  
26  Option risk measures  Chapter 17 
27  Derivative mishaps  Chapter 25 
28  Review 