Module 1

Module 1: Analyze derivatives in Managing Risk, arbitrage and speculation (6 hours)

1. Introduction to options, futures and forwards
2. Hedging strategies using futures, forwards and options.

Module 2

Module 2: Apply appropriate models to price forwards, futures and options. (6 hours)

1. Determination of forwards and future prices.
2. Option pricing models: Binomial tress.
3. The Black – Scholes – Merton model.

Module 3

Module 3: Able option trading strategies to limit risk, hedge or speculation (6 hours)

1. Trading strategies involving options.

Module 4

Module 4: Measure the option’s price sensitivity to changes in the Greeks (6 hours)

1. The Greek Letters: Delta, theta, Gamma, Vega and Rho

Module 4

Module 5: Identify ethical risk associated with financial derivatives (6 hours)

1. Ethical risks associated with financial derivatives.

Course Description

This course introduces derivatives such as forwards, futures, swaps, and options. Students will learn how these instruments can be used for arbitrage, trading and hedging and also learn pricing of these derivative instruments using DerivaGem software.

Course Outcomes& Learning levels

At the end of the course, students will able to,

1. Analyze derivatives in managing risk, arbitrage and speculation.

1. Apply appropriate models to price forwards, futures, and options.

1. Apply option trading strategies to limit risk, hedge, or speculation.

1. Measure the option’s price sensitivity to changes in the Greeks.

1. Identify ethical risks associated with financial derivatives.

Evaluation Pattern

• Based on assignments / Tests / Quizzes / Case Studies / Projects / Term paper / Field visit report.

Course Text:

1. Hull, John C. Options, Futures, and Other Derivatives, 10th Edition, Pearson, 2018.