CORPFIN 7020 - Derivatives (M)
North Terrace Campus - Semester 1 - 2022
General Course Information
Course Code CORPFIN 7020 Course Derivatives (M) Coordinating Unit Adelaide 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 and 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 options on futures and some alternative exotic options. Applications developed at the University of Adelaide are used to complement the study of derivative securities.
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. Employ core concepts of futures in pricing futures and forwards
2. Interpret and analyse market for a mix of underlying and derivative securities data for appropriate hedging and risk management strategies
3. Apply stock price dynamics and hedge parameters to price options
4. Design appropriate hedging and arbitrage strategies with derivative securities
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)
Attribute 1: Deep discipline knowledge and intellectual breadth
Graduates have comprehensive knowledge and understanding of their subject area, the ability to engage with different traditions of thought, and the ability to apply their knowledge in practice including in multi-disciplinary or multi-professional contexts.
1, 2, 3 and 4
Attribute 2: Creative and critical thinking, and problem solving
Graduates are effective problems-solvers, able to apply critical, creative and evidence-based thinking to conceive innovative responses to future challenges.
1, 2, 3 and 4
Attribute 3: Teamwork and communication skills
Graduates convey ideas and information effectively to a range of audiences for a variety of purposes and contribute in a positive and collaborative manner to achieving common goals.
1, 2, 3 and 4
Attribute 4: Professionalism and leadership readiness
Graduates engage in professional behaviour and have the potential to be entrepreneurial and take leadership roles in their chosen occupations or careers and communities.
1, 2, 3 and 4
Attribute 5: Intercultural and ethical competency
Graduates are responsible and effective global citizens whose personal values and practices are consistent with their roles as responsible members of society.
1, 2, 3 and 4
Attribute 6: Australian Aboriginal and Torres Strait Islander cultural competency
Graduates have an understanding of, and respect for, Australian Aboriginal and Torres Strait Islander values, culture and knowledge.
1, 2, 3 and 4
Attribute 7: Digital capabilities
Graduates are well prepared for living, learning and working in a digital society.
1, 2, 3 and 4
Attribute 8: Self-awareness and emotional intelligence
Graduates are self-aware and reflective; they are flexible and resilient and have the capacity to accept and give constructive feedback; they act with integrity and take responsibility for their actions.
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:
• Introduction to Derivatives and Risk Management
by Don M. Chance/Robert Brooks
• Futures, Options & Swaps
by Robert W. Kolb and James A. Overdahl
• Options, Futures and Other Derivatives
by John C. Hull
by Rangarajan Sundaram, Sanjiv Das
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.
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 Futures Markets
2. Principles of Forward and Futures Pricing
3. Hedging with Futures
4. An Introduction to Options Markets
5. Basic Options Valuation
6. The Binomial Option Pricing Model
7. The Black-Scholes Option Pricing Model - part I
8. The Black-Scholes Option Pricing Model - part II
9. Options Strategies and Risk Management for Individuals
10. Options on Futures, Currency Derivatives and Exotic Options
* The order of topics is subject to change
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 Task Due Weighting Learning Outcome Online test Week 6 20% 1, 2 Assignment Week 11 30% 3, 4 Final exam Exam period 50% All Total 100%
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 total of at least 50% overall must be attained.
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.
• All group assignments must attach a ‘Group Assignment Cover Sheet’, which must be signed and dated by all group members before submission. All team members are expected to contribute approximately equally to a group assignment.
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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