Course Syllabus

JOHN CABOT UNIVERSITY

COURSE CODE: "FIN 340"
COURSE NAME: "Introduction to Derivatives"
SEMESTER & YEAR: Spring 2018

SYLLABUS

INSTRUCTOR: Crina Pungulescu
EMAIL: [email protected]
HOURS: TTH 4:30-5:45 PM
TOTAL NO. OF CONTACT HOURS: 45
CREDITS: 3
PREREQUISITES: Prerequisite: FIN 301
OFFICE HOURS: by appointment

COURSE DESCRIPTION:
Focusing on both theory and application, the course will cover forward, futures, swaps and options markets. Students will learn how derivatives markets operate, and how derivatives are priced and used, in order to understand the importance of derivative instruments in business and the economy. Special attention will be paid to the mechanics of derivative instruments and the markets in which they trade, using the Law of One Price and arbitrage forces to develop derivatives pricing models, applying derivatives pricing models using real world data, communicating derivative hedging strategies and applying speculative strategies using derivatives.

SUMMARY OF COURSE CONTENT:

This syllabus is a draft. The first syllabus will be distributed the first day of class.

The topics covered are:

Debt Securities Markets

· Money Markets

· Bond Markets

· Bond Valuation and Risk

· Mortgage Markets

Equity Markets

· Stock Offerings and Investor Monitoring

· Stock Valuation and Risk

· Market Microstructure and Strategies

Derivative Security Markets

· Background on Financial Futures

· Interest Rate Futures Contracts

· Stock Index Futures

· Single Stock Futures

· Risk of Trading Futures Contracts

· Globalization of Futures Markets

Option Markets

· Background on Options

· Determinants of Stock Option Premiums

· Speculating with Stock Options

· Hedging with Stock Options

· Options on ETFs and Stock Indexes

· Options on Future Contracts

· Options as Executive Compensation

· Globalization of Options Markets

Swap Markets

· Background

· Types of Interest Rate Swaps

· Risks of Interest Rate Swaps

· Pricing Interest Rate Swaps

· Performance of Interest Rate Swaps

· Interest Rate Caps, Floors, and Collars

· Credit Default Swaps

· Globalization of Swap Markets

Foreign Exchange Derivative Markets

· Foreign Exchange Markets

· Factors Affecting Exchange Rates

· Forecasting Exchange Rates

· Foreign Exchange Derivatives

· International Arbitrage

LEARNING OUTCOMES:

Upon successful completion of the course a student will be able to:

· Understand the importance of derivative instruments in business and the economy.

· Understand the mechanics of derivative instruments and the markets in which they trade.

· Be able to apply derivatives pricing models using real world data.

· Be able to effectively illustrate and apply derivative hedging strategies.

· Understand and apply speculative strategies using derivatives.

TEXTBOOK:

Book Title	Author	Publisher	ISBN number	Library Call Number	Comments	Format	Local Bookstore	Online Purchase
Financial Institutions and Markets (MD)	J. Madura	South-Western, Cengage Learning	9781133947882		Other editions of the textbook are also acceptable.
Fundamentals of Futures and Options Markets (HL)	J. Hull	Pearson, Prentice Hall	9780134083247		Other editions of the textbook are also acceptable.

REQUIRED RESERVED READING:

NONE

RECOMMENDED RESERVED READING:

NONE

GRADING POLICY
-ASSESSMENT METHODS:

Assignment	Guidelines	Weight
Quizzes and Homework		20
Exam 1		20
Exam 2		20
Final Exam		40

-ASSESSMENT CRITERIA:
AWork of this quality directly addresses the question or problem raised and provides a coherent argument displaying an extensive knowledge of relevant information or content. The student demonstrates complete, accurate, and critical knowledge of all the topics, and is able to solve problems autonomously.
BThis is highly competent level of performance and directly addresses the question or problem raised. There is a demonstration of some ability to critically evaluate theory and concepts and relate them to practice. The work does not suffer from any major errors or omissions and provides evidence that the student uses clear logic in his/her arguments.
CThis is an acceptable level of performance and provides answers that are clear but limited, reflecting the information offered in the lectures. Mathematical statements are properly written most of the time.
DThis level of performances demonstrates that the student lacks a coherent grasp of the material. Important information is omitted and irrelevant points included. Many mistakes are made in solving the problem raised. In effect, the student has barely done enough to persuade the instructor that s/he should not fail.
FThis work fails to show any knowledge or understanding of the subject-matter. Most of the material in the answer is irrelevant.

-ATTENDANCE REQUIREMENTS:

Students are required to attend classes following the University’s policies.

ACADEMIC HONESTY
As stated in the university catalog, any student who commits an act of academic dishonesty will receive a failing grade on the work in which the dishonesty occurred. In addition, acts of academic dishonesty, irrespective of the weight of the assignment, may result in the student receiving a failing grade in the course. Instances of academic dishonesty will be reported to the Dean of Academic Affairs. A student who is reported twice for academic dishonesty is subject to summary dismissal from the University. In such a case, the Academic Council will then make a recommendation to the President, who will make the final decision.

STUDENTS WITH LEARNING OR OTHER DISABILITIES
John Cabot University does not discriminate on the basis of disability or handicap. Students with approved accommodations must inform their professors at the beginning of the term. Please see the website for the complete policy.

SCHEDULE

Session	Session Focus	Meeting Place/Exam Dates
Week 1 to 4	Introduction, Debt and Equity Securities Markets (MD Chapters 6 to 12)
Week 4 to 7	Derivative Securities Markets: Futures and Forward Contracts (MD Chapter 13)	Exam 1 (Week 6 or 7, to be announced in class)
Week 7 to 10	Derivative Securities Markets: Option Markets (MD Chapter 14)
Week 10 to 13	Derivative Securities Markets: Swap Markets and Foreign Derivatives Markets (MD Chapters 15 and 16)	Exam 2 (Week 10 or 11, to be announced in class)
Week 14	Review for Final Exam	Final Exam (Comprehensive): see University schedule for date and time