MFGV: Derivatives (BBA30018)

General information

Type:	OP	Curs:	3	Period:	S semester
ECTS Credits:	4 ECTS

Teaching Staff:

Group	Teacher	Department	Language
	Eero Kasanen	Economía, Finanzas y Contabilidad	ENG

Introduction to Corporate Finance or similar introductory courses.

Understanding of stocks and bonds, discounting, calculus, and how to use spreadsheet for calculations.

class participation 25%
group work for essays and games 35%
group work for exercises 20%
preparation for final exam 20%

Understanding of important financial instruments and markets.
Analysis of complex financial issues.
Personal argumentation skills.
Decision making in groups.

Understanding derivatives markets.
Using sophisticated financial tools in hedging, risk management, and investing.
Fundamental principles in pricing of derivatives.
Broader understanding of uses and risks of options and futures.

2. Application of knowledge to achieve results

7. Comprehension of the complexity of the local and global contexts

6. Strategic thought, systematic thought

3. Taking decisions / making judgments

1. Introduction to derivatives, their opportunities and challenges What are derivatives? Examples of various derivatives. Global derivatives market. Exchanges and OTC. How to tailor risk with derivatives? Typical uses of derivatives. Risks and challenges of derivatives.

2. No-arbitrage theory and its use in pricing Fundamental principle of efficient markets, no-arbitrage. Law of one price and Time value of money. Using no-arbitrage theory to price financial assets, especially derivatives. Theoretical foundations of the course.

3. Forwards and Futures, uses and pricing Forwards and futures markets Margin requirements and fees Uses of forwards and futures in hedging, arbitrage, and investment. Pricing of futures

4. Swaps Swap markets Currency and interest rate swaps Uses of swaps Pricing of swaps

5. Options Options markets Introduction to various options Option trading strategies Uses of options in hedging and investments Principles of option pricing, binomial trees and Black&Scholes formula

6. Derivatives in financial management Typical examples of popular uses: currency hedging and investing interest rate hedging and investing option on futures convertible debt executive incentive schemes credit default swaps

7. Trading game group game using a professional platform and real market data

8. Essays Group essays on opportunities and challenges of derivatives

Learning theoretical concepts: NPV, no-arbitrage, binomial tree, risk-neutral valuation.
Writing essays and debating on derivatives.
Using professional platform to make simulated investment decisions.
Doing analytical and spreadsheet exercises.

ASSESSMENT BREAKDOWN

Hull, John C.: Options, Futures, and Other Derivatives. Ninth edition. Pearson. (textbook)
Class handouts.
Cases

Group	Teacher	Department
	Eero Kasanen	Economía, Finanzas y Contabilidad