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JOHN CABOT UNIVERSITY
COURSE CODE: "FIN 340"
COURSE NAME: "Introduction to Derivatives"
SEMESTER & YEAR:
Fall 2014
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SYLLABUS
INSTRUCTOR:
Alessandro Antonelli
EMAIL: [email protected]
HOURS:
MW 11:30 AM 12:45 PM
TOTAL NO. OF CONTACT HOURS:
45
CREDITS:
3
PREREQUISITES:
Prerequisite: FIN 301
OFFICE HOURS:
By appointment
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COURSE DESCRIPTION:
This course is designed to equip students with a sound conceptual framework for understanding the basic derivative markets and contracts, and the main uses of forwards, futures, options, and swaps in risk management and investment strategies. The course focuses on theory as well as applications. However, unlike much of the theory in the social sciences, the theory learned in this course has been widely assimilated into actual practice, and it is extensively applicable to today’s highly developed and rapidly growing derivatives markets.
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SUMMARY OF COURSE CONTENT:
Derivative markets and contracts
* Debt and equity markets.
* Forwards
* Futures
* Options
* Swaps
* Alternative investments
* Regulatory reforms, ethics and best practices.
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LEARNING OUTCOMES:
* 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.
* Comprehend and apply speculative strategies using derivatives.
* Be aware of major strengths and limits of derivatives, of the existence of important ethical issues, and of the need of modern, effective regulations of markets and contracts.
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TEXTBOOK:
| Book Title | Author | Publisher | ISBN number | Library Call Number | Comments | Format | Local Bookstore | Online Purchase |
| Financial Institutions and Markets, 10th ed. | Jeff Madura | South Western - Cengage Learning | ISBN-10: 0538482176; ISBN-13: 9780538482172 | | | | | |
| Fundamentals of Futures and Options Markets, 8/e (This textbook can be used as an alternative to Jeff Madura's textbook) | John C. Hull | Prentice Hall, 2013. | ISBN-10: 0132993341 | ISBN-13: 978-0132993340 | | | | | |
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REQUIRED RESERVED READING:
RECOMMENDED RESERVED READING:
| Book Title | Author | Publisher | ISBN number | Library Call Number | Comments |
| Introduction to Alternative Investments, 2011 (web document available to all) | Morgan Stanley Smith Barney | Morgan Stanley Smith Barney | .. | | |
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GRADING POLICY
-ASSESSMENT METHODS:
| Assignment | Guidelines | Weight |
| Exam 1, Exam 2, Class Presentation/Exercises, Class Participation | | 30% + 40% + 15% + 15% |
| | The two exams (30% + 40%) will consist of essay-type questions, graphic analysis, as well as some problems that require quantitative analysis, in which the student is asked to explain and/or solve with accuracy and clarity issues of a particular topic covered by the syllabus.
Cases and/or class exercises (overall weight: 15%) will be assigned by the professor. Each student should be prepared to offer an effective oral and written summary of the case/exercise and the key facts to the class, and to present their views regarding the possible questions.
The class participation grade (15%) will reflect the students care in attending the class, and her or his interventions during class. Unjustified absences will negatively affect the class participation grade.
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-ASSESSMENT CRITERIA:
A Work of this quality directly addresses the question or problem raised and provides a coherent argument displaying an extensive knowledge of relevant information or content. This type of work demonstrates the ability to critically evaluate concepts and theory and has an element of novelty and originality. There is clear evidence of a significant amount of reading beyond that required for the course
B This is highly competent level of performance and directly addresses the question or problem raised.There is a demonstration of some ability to critically evaluatetheory and concepts and relate them to practice. Discussions reflect the student’s own arguments and are not simply a repetition of standard lecture andreference material. The work does not suffer from any major errors or omissions and provides evidence of reading beyond the required assignments.
C This is an acceptable level of performance and provides answers that are clear but limited, reflecting the information offered in the lectures and reference readings.
D This level of performances demonstrates that the student lacks a coherent grasp of the material.Important information is omitted and irrelevant points included.In effect, the student has barely done enough to persuade the instructor that s/he should not fail.
F This work fails to show any knowledge or understanding of the issues raised in the question. Most of the material in the answer is irrelevant.
-ATTENDANCE REQUIREMENTS:
The University attendance policy is described in the catalogue. Persistent absence or tardiness usually precludes satisfactory performance in the course. Students are expected to arrive to class on time and are responsible for all material covered by the syllabus and/or discussed in class, whether or not they are actually present in class.
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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.
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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.
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SCHEDULE
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1. Introduction: derivatives and underlying assets
2. Debt and equity markets
Money markets
Bond markets
Mortgage markets
Equity markets
Mutual funds: stock, bond, money market, exchange traded funds
3. Forward and Futures markets
Forward markets and contracts
Background on financial futures
Interest rate futures contracts
Stock index futures
Single stock futures
Risk of trading futures contracts
Globalization of futures markets
OCTOBER 6: class exercises (compulsory)
4. 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 futures contracts
Options as executive compensation
Currency options contracts
Globalization of options markets
October 27: EXAM 1 (part 1, 2, 3, 4)
5. Interest rate derivative markets
Background on interest rate swaps
Types of interest rate swaps
Risks of interest rate swaps
Interest rate caps, floors, and collars
Credit default swaps
Impact of the credit crisis on the CDS market
Globalization of swap markets
6. Foreign exchange derivative markets
Foreign exchange markets
Factors affecting exchange rates
Forecasting exchange rates
Forward contracts
Currency futures contracts
Currency swaps
Currency option contracts
International arbitrage
7. Alternative investments
Hedge funds
Private equity funds
Real estate
Commodities
8. Best practices, ethical issues, reforms
EXAM 2, FINAL (part 5, 6, 7, 8): see University schedule for day and time.
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