MFGV: Derivatives (19BBA30018)

General information

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

Teaching Staff:

Group	Teacher	Department	Language
Ed: 1	Eero Kasanen	Economía, Finanzas y Contabilidad	ENG

Group	Teacher	Department	Language

Introduction to Corporate Finance and Financial Markets or similar introductory courses.

Understanding of stocks, bonds and basic functioning of financial markets.
Comfortable with doing financial calculations like discounting, interest rates, exponential and logarithmic functions.
Knowing how to use spreadsheet for calculations and modeling.

class participation 30%
group work for trading game 20%
group work for exercises 30%
preparation for final exam 20%

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

Understanding derivatives markets.
Financial decision making with real data and real trading platforms.
Using sophisticated financial tools in hedging, risk management, and investing.
Fundamental principles of 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 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 convertible debt executive incentive schemes credit default swaps

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

Learning theoretical concepts like NPV, no-arbitrage, binomial tree, risk-neutral valuation.
Using professional trading platform to make simulated investment decisions.
Solving conceptual, analytical and spreadsheet problems.

ASSESSMENT BREAKDOWN

Hull, John C.: Options, Futures, and Other Derivatives. 10th edition (9th can also be used). Pearson.
(also applicable Hull, John C.: Fundamentals of Futures and Options Markets. 8th or later edition. Pearson.)
Class handouts.

Group	Teacher	Department
Ed: 1	Eero Kasanen	Economía, Finanzas y Contabilidad

Group	Teacher	Department