CORPFIN 7020 - Options Futures & Risk Management (M)
North Terrace Campus - Semester 2 - 2014
General Course Information
Course Code CORPFIN 7020 Course Options Futures & Risk Management (M) Coordinating Unit Business School Term Semester 2 Level Postgraduate Coursework Location/s North Terrace Campus Units 3 Contact Up to 3 hours per week Prerequisites CORPFIN 7005 & CORPFIN 7039 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: Shan LiSemester 1 - Course Coordinator
Mr Gary Tan
Semester 2 - Course Coordinator
Dr Shan Li
The full timetable of all activities for this course can be accessed from Course Planner.
Course Learning OutcomesKnowledge and Understanding
This course is designed to provide coverage of the principles behind the pricing and utilisation of derivatives as an investment tool plus hedging instrument. This course is geared towards those students following a pathway incorporating finance in their study program. This course forms part of RG146 ASIC requirements for providing financial derivatives advice in Australia, plus covers a significant amount of the body of knowledge on derivatives required for CFA examinations.
The continuing development of good inter-personal and communication skills is widely recognised as important for all graduates. This course specifically seeks to develop students’ abilities to participate in discussions in tutorials.
By the end of this course students should 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) Knowledge and understanding of the content and techniques of a chosen discipline at advanced levels that are internationally recognised. 1 and 2 The ability to locate, analyse, evaluate and synthesise information from a wide variety of sources in a planned and timely manner. 3 and 4 An ability to apply effective, creative and innovative solutions, both independently and cooperatively, to current and future problems. 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 from the course-reader 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.
Recommended ResourcesPerdisco e-workbook: www.perdisco.com.au/login
An online study resource has been developed for this unit to help you learn the content that will be covered. Using hundreds of interactive practice questions and problem solving exercises, the e workbook helps you make the most of your study time by offering:
• The chance to practice and revise each topic until you completely understand it
• Step-by-step feedback explaining why each answer you have given was correct or incorrect
• Help that’s available when you need it (even outside of normal class hours)
The e workbook will provide unlimited access throughout the course and can be purchased online by credit card, money order, cheque or BPAY. Payment instructions are provided after registration.
To start using the e-workbook, visit www.perdisco.com.au/login and click on ‘Create a new account’.
E-workbook assessment tasks
The e-workbook is also being used to deliver interactive assessment tasks that will contribute to your overall assessment marks for this unit. The assessments can be submitted online from anywhere, are marked instantly and give you immediate feedback on your performance. You do not have to pay for the e-workbook to take the assessment, as non-paying students can access the Special Reserve online which provides access to students, but on a limited time basis only. Further details are contained on the MyUni course website in regards to the Special Reserve.
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. Finally, part of the assessment of this course is via online tests provided as a free service by Perdisco.
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'. Students are also encouraged to utilise the recommended resources described in the section 'Recommended 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 to be most important by the School and are highly regarded by employers and professional bodies.
One two-hour workshop on a futures trading platform will be conducted. The time and the location will be advised.
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
8. Options Strategies and Risk Management for Individuals
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 3 online tests that are conducted through www.perdisco.com.au. Further details regarding Perdisco access are contained on MyUni.
Students must complete the tests within a 2 hour time span from the time they access each test. Students are able to click on the test links multiple times during the 2 hour time period. If students fail to submit a test within the time limit, whatever is completed within that period will automatically be submitted. The timer starts to count down from the first time the test link is clicked and will continue to count down irrespective of whether the student is logged in or logged out of the account.
Each test is available for a 5 day period from 9am Monday to 10pm Friday from the dates specified below. You must sit each test during these specified periods.
o Assignment (worth 15% towards your final grade)
o 1 closed-book final exam (worth 65% towards your final grade)
The assessment components are as follows:
Assesment Due Date Weighting Related Learning Outcome Online Test #1 25th August - 29th August 5% 8 questions focused on #2, #3 and #4 (Topics 1-3) Online Test #2 15th September - 19th September 5% 7 questions focused on #1 (Topics 4-5) Online Test #3 27th October - 31st October 10% Numerical case study focused on #1 and #3 (Topics 5-8) Assignment To be advised 15% Topics 1 -3 Final Exam
3 hours Closed book
See examinations office for date of exam. 65% 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 an important aspect 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 DetailSample test questions similar to the online tests are available to students through the Perdisco e-workbook as practise tests. In addition, a practice exam and a sample exam will be provided for viewing on the MyUni website when close to the end of Semester 2.
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.
More details regarding the submission will be available with the 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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- Student Life Counselling Support - Personal counselling for issues affecting study
- International Student Support
- AUU Student Care - Advocacy, confidential counselling, welfare support and advice
- Students with a Disability - Alternative academic arrangements
- Reasonable Adjustments to Teaching & Assessment for Students with a Disability Policy
- LinkedIn Learning
Policies & Guidelines
This section contains links to relevant assessment-related policies and guidelines - all university policies.
- Academic Credit Arrangement Policy
- Academic Honesty Policy
- Academic Progress by Coursework Students Policy
- Assessment for Coursework Programs
- Copyright Compliance Policy
- Coursework Academic Programs Policy
- Elder Conservatorium of Music Noise Management Plan
- Intellectual Property Policy
- IT Acceptable Use and Security Policy
- Modified Arrangements for Coursework Assessment
- Student Experience of Learning and Teaching Policy
- Student Grievance Resolution Process
Students are reminded that in order to maintain the academic integrity of all programs and courses, the university has a zero-tolerance approach to students offering money or significant value goods or services to any staff member who is involved in their teaching or assessment. Students offering lecturers or tutors or professional staff anything more than a small token of appreciation is totally unacceptable, in any circumstances. Staff members are obliged to report all such incidents to their supervisor/manager, who will refer them for action under the university's student’s disciplinary procedures.
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