CORPFIN 7020 - Derivatives (M)
North Terrace Campus - Semester 1 - 2020
General Course Information
Course Code CORPFIN 7020 Course Derivatives (M) Coordinating Unit Business School Term Semester 1 Level Postgraduate Coursework Location/s North Terrace Campus Units 3 Contact Up to 4 hours per week Available for Study Abroad and Exchange Y Prerequisites CORPFIN 7039, CORPFIN 7040 Course Description This course examines the function and operation derivative markets serve in finance. To begin, the course identifies relationships that must hold in such markets if there are to be no arbitrage opportunities. The course then covers options pricing using the Binomial and Black-Scholes approach, as well as describing a wide range of futures and options dealing strategies, along with their applications to hedging and risk management. Currency and fixed-interest derivatives are also considered as well as swaps, options on futures and some alternative exotic options.
Course Coordinator: Dr Gary Tan
The full timetable of all activities for this course can be accessed from Course Planner.
Course Learning OutcomesOn successful completion of this course, students will be able to:
1. Price American and European options
2. Price forward and futures contracts
3. Develop strategies to profit from mispriced derivative assets
4. Hedge underlying positions using derivatives
University Graduate Attributes
This course will provide students with an opportunity to develop the Graduate Attribute(s) specified below:
University Graduate Attribute Course Learning Outcome(s) Deep discipline knowledge
- informed and infused by cutting edge research, scaffolded throughout their program of studies
- acquired from personal interaction with research active educators, from year 1
- accredited or validated against national or international standards (for relevant programs)
1, 2, 3 and 4 Critical thinking and problem solving
- steeped in research methods and rigor
- based on empirical evidence and the scientific approach to knowledge development
- demonstrated through appropriate and relevant assessment
1, 2, 3 and 4 Teamwork and communication skills
- developed from, with, and via the SGDE
- honed through assessment and practice throughout the program of studies
- encouraged and valued in all aspects of learning
1, 2, 3 and 4 Career and leadership readiness
- technology savvy
- professional and, where relevant, fully accredited
- forward thinking and well informed
- tested and validated by work based experiences
1, 2, 3 and 4 Intercultural and ethical competency
- adept at operating in other cultures
- comfortable with different nationalities and social contexts
- able to determine and contribute to desirable social outcomes
- demonstrated by study abroad or with an understanding of indigenous knowledges
1, 2, 3 and 4 Self-awareness and emotional intelligence
- a capacity for self-reflection and a willingness to engage in self-appraisal
- open to objective and constructive feedback from supervisors and peers
- able to negotiate difficult social situations, defuse conflict and engage positively in purposeful debate
1, 2, 3 and 4
Required ResourcesText Books
The core material that will be covered within the course is available on MyUni. However, it is also a requirement that you obtain a copy of one of the following texts and that you supplement your studies of the core material with one of these texts:
• Chance, Don .M, An Introduction to Derivatives and Risk Management.
• Kolb, R.W, Futures, Options & Swaps.
• Hull, J., Options, Futures and Other Derivatives.
• Das, Sundram, Derivatives Principles and Practice.
Any of the above texts will be of immense use. However, this course is based around the Australasian market for derivatives and as such some differences exist between the textbooks and what is taught in the lectures. This course also follows closely the body of knowledge deemed necessary for completion of the CFA levels I to III examinations.
The following articles are available on MyUni:
• ‘What Does an Option Pricing Model Tell Us About Option Prices?’ by Stephen Figlewski, Financial Analysts Journal, Sept-Oct 1989.
• ‘Risk Without Reward’ by James Glassman, The Browser – HARVARD magazine.
• ‘How Leeson Broke Barings’ by IFCI Risk Institute at www.newrisk.ifci.ch
• ‘Risk Management Lessons from Long-Term Capital Management’ by Philippe Jorion, European Financial Management Journal, 6:277-300, 2000.
• ‘Derivatives Debacles’ by Anatoli Kuprianov, Federal Reserve of Richmond, Economic Quarterly, 81:4, 1995.
Online LearningVideos are available of the topics covered in the course and serve as a learning-aid, not a replacement for attending lectures as the material presented can differ slightly on an annual basis.
Other materials, including supplementary questions & answers, are also available on MyUni for students to work through in addition to the regular tutorial questions.
Learning & Teaching Activities
Learning & Teaching ModesLectures
Learning and teaching for this course will be delivered through lectures, supplemented with the reading materials mentioned in the section "Required Resources".
Tutorial classes will be held weekly commencing second week of the semester. Membership of tutorial classes is to be finalised by the end of the second week of semester.
Tutorials are an important component of your learning in this course. The communication skills developed in tutorials by regularly and actively participating in discussions are considered most important by the School and are highly regarded by employers and professional bodies.
Trading practice sessions
During the semester there will be practice sessions on derivatives trading, designed to enhance experience, learning and understanding of the practical aspect of the course. Details will be made available on MyUni.
Consultation and Communication
Please check your student email and MyUni as course-related announcements are communicated via email and on MyUni.
Lecturer consultation times are advertised on MyUni course website.
Tutors will inform you of their consultation arrangements at your first tutorial. This information will also be placed on MyUni
The information below is provided as a guide to assist students in engaging appropriately with the course requirements.The University expects full-time students (i.e. those taking 12 units per semester) to devote a total of 48 hours per week to their studies. This means that you are expected to commit approximately 9 hours for a three-unit course or 13 hours for a four-unit course, of private study outside of your regular classes.
Students in this course are expected to attend all lectures throughout the semester plus one tutorial class each week.
Learning Activities SummaryThe course material is presented in 10 topics, as described below:
1. An Introduction to Options Markets
2. Basic Options Valuation
3. The Binomial Option Pricing Model
4. The Black-Scholes Option Pricing Model
5. Options Strategies and Risk Management for Individuals
6. An Introduction to Futures Markets
7. Principles of Forward and Futures Pricing
8. Hedging with Futures
9. Options on Futures, Currency Derivatives and Exotic Options
10. An Introduction to Swaps
Two case studies will also be examined during the semester. They are:
• The Demise of Long-Term Capital Management
• Barings Bank Collapse
The University's policy on Assessment for Coursework Programs is based on the following four principles:
- Assessment must encourage and reinforce learning.
- Assessment must enable robust and fair judgements about student performance.
- Assessment practices must be fair and equitable to students and give them the opportunity to demonstrate what they have learned.
- Assessment must maintain academic standards.
Assessment SummaryThe assessment components include:
o 2 assignments (worth 20% each towards your final grade)
o 1 closed-book final exam (worth 60% towards your final grade)
Assessment Task Due Weighting Learning Outcome Assignment 1 week 5-8 20% 1,3,4 Assignment 2 week 10-12 20% 2,3,4 Final Exam Examinations period 60% All Total 100%
To support the changes to teaching, the following revisions to assessment have been made:-
Summary of the assessments
Individual Assignment 1 on Options worth 25%, due week 7
Individual Assignment 2 on Futures worth 25%, due week 12
Online Final Exam worth 50%, to be held during the final exam period
Further details will be provided in due course.
Assessment Related Requirements1. The assignment should be presented as a professional report for a client. As such the presentation and ‘readability’ of the document will be important aspects in its assessment.
2. To gain a pass for this course, a mark of at least 45% must be obtained on the examination as well as a total of at least 50% overall. Students not achieving the minimum exam mark will be awarded no more than 49.
3. Legible hand-writing and the quality of English expression are considered to be integral parts of the assessment process.
4. Students in this course are not permitted to take a DICTIONARY (English or English-Foreign) into the examination. The use of a calculator in the examination is permitted in this course.
Assessment DetailPractice and sample examination papers complete with solutions guidelines are available on MyUni.
SubmissionPresentation of Assignments
• Please retain a copy of all assignments submitted.
• Please attach an ‘Assignment Cover Sheet’, which is signed and dated by you before submission.
Lecturers can refuse to accept assignments, which do not have a signed acknowledgement of the University’s policy on plagiarism.
Late Assignment Submission
Students are expected to submit their work by the due date to maintain a fair and equitable system. Extensions will generally only be given for medical or other serious reasons. All requests for extensions must be emailed to the lecturer in charge of the course before the due date. Each request will be assessed on its merits. A late assignment (without prior arrangement) will be penalised by a 10% mark reduction for each day, or part thereof, that it is late.
Return of Assignments
Lecturer will aim to mark and return assignments to students within four (4) weeks of the due date with written feedback.
Grades for your performance in this course will be awarded in accordance with the following scheme:
M10 (Coursework Mark Scheme) Grade Mark Description FNS Fail No Submission F 1-49 Fail P 50-64 Pass C 65-74 Credit D 75-84 Distinction HD 85-100 High Distinction CN Continuing NFE No Formal Examination RP Result Pending
Further details of the grades/results can be obtained from Examinations.
Grade Descriptors are available which provide a general guide to the standard of work that is expected at each grade level. More information at Assessment for Coursework Programs.
Final results for this course will be made available through Access Adelaide.
The University places a high priority on approaches to learning and teaching that enhance the student experience. Feedback is sought from students in a variety of ways including on-going engagement with staff, the use of online discussion boards and the use of Student Experience of Learning and Teaching (SELT) surveys as well as GOS surveys and Program reviews.
SELTs are an important source of information to inform individual teaching practice, decisions about teaching duties, and course and program curriculum design. They enable the University to assess how effectively its learning environments and teaching practices facilitate student engagement and learning outcomes. Under the current SELT Policy (http://www.adelaide.edu.au/policies/101/) course SELTs are mandated and must be conducted at the conclusion of each term/semester/trimester for every course offering. Feedback on issues raised through course SELT surveys is made available to enrolled students through various resources (e.g. MyUni). In addition aggregated course SELT data is available.
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