- Semester III/IV
- Number of Credits: 4
Preamble
This is a one-semester course to be taught over 48 lectures with the objective to acquaint students with the concepts and analytics of financial derivative securities, the different derivative instruments and the pricing of derivative securities.
Module 1: Introduction to Basic Concepts (8 Lectures)
Time Value of Money – Equities – Commodities - Fixed Income Securities.
Module 2: Forwards, Futures and Options (16 Lectures)
Basic Concepts - Purpose of Futures Markets (price discovery and hedging) - Types of Traders and Orders in Futures Markets -Forward Rate Agreements (FRAs) - Option Positions, Margins, Bid-Ask Spread, Writing Options, Warrants and Convertibles, Exotic Options, Put-Call Parity - Straddles and Strangles, Spreads.
Module 3: Pricing of Derivative Securities(12 Lectures)
Determination of Forward and Futures Prices, Characteristics of Futures Prices, Futures Prices and Expectations, Hedging Strategies using Futures - Black-Scholes Model, Alternatives to Black-Scholes, the Greeks, Speculating and Hedging with Options - Bond Options and Pricing of Contingent Claims.
Module 4: Swaps (12 Lectures)
Comparative Advantage Principle, Swap Facilitators (Brokers And Dealers), Interest Rate and Currency Swaps and their Valuation, Other Swaps (Equity Swaps, Commodity Swaps).
References
1. |
Wilmott, Paul (1999): Derivatives: The Theory and Practice of Financial Engineering, John Wiley and Sons, |
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New York |
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2. |
Hull, John C. (2006): Options, Futures and Other Derivatives, Sixth Edition, Pearson Prentice Hall. |
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3. |
Redhead K. (1997): Financial Derivatives: An Introduction to Futures, Forwards, Options and Swaps, |
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Prentice Hall. |
Additional References
1. |
Kolb R.W., (1997): Understanding Futures Markets, Fourth Edition, Blackwell Publishing, New York |
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2. |
Marshall, J.F. and K.R. Kapner (1993): The Swaps Market, Second Edition, Kolb Publishing House |
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M.A. Credit Course 
