CORPFIN 7020NA - Derivatives (M)
Ngee Ann Academy - Trimester 3 - 2016
General Course Information
Course Code CORPFIN 7020NA Course Derivatives (M) Coordinating Unit Business School Term Trimester 3 Level Postgraduate Coursework Location/s Ngee Ann Academy Units 3 Available for Study Abroad and Exchange N Corequisites CORPFIN 7039NA Assumed Knowledge CORPFIN 7039NA 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: Professor Ralf Zurbrugg
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) 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
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
3 and 4
Required ResourcesText Books
The course-reader contains the core material that will be covered within the course. 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, any edition.
• Kolb, R.W, Futures, Options & Swaps, any edition.
• Hull, J., Options, Futures and Other Derivatives, any edition.
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 textbook 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 exams.
Included in the study guide, are the following articles:
• ‘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/students
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/students 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 as an 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 ModesTwo intensive weekends.
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 the equivalent of 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 of private study outside of your regular classes.
Students in this course are expected to attend intensives
Learning Activities SummaryThe course material is presented in 9 topics, as described below:
1. An Introduction to Options Markets
2. Basic Option 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. Futures on Options, Currency Derivatives and Exotic Options
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 and will also be discussed during class.
o 1 group 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:
Assessment Due Date and time Weighting Related Learning Outcome Online test #1 Anytime during the course 5% 10 questions focused on #1(Topics 1-2) Online test #2 Anytime during the course 5% 10 questions focused on #1 and #3 (Topics 2-5) Online test #3 Anytime during the course 10% Numerical case study focused on #2 and #4 (Topics 6-9) Group assignment Available to download
from MyUni website.
Due for submission at 2nd intensive.
15% #3 and #4 (Topics 6-9) Final Exam
3 hours. Closed book.
65% All Total 100%
Assessment Related Requirements1. The group 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. Example of a previous similar assignment will be posted on the MyUni site.
3. 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.
4. Legible hand-writing and the quality of English expression are considered to be integral parts of the assessment process. Marks may be deducted in the final examination because of poor hand-writing.
5. 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.
Statutory obligations in Singapore are such that attendance in person is a compulsory condition of passing a course. Our specific requirements are that students must attend at least 80% of class sessions to be graded for that course. For these purposes each intensive weekend is defined as comprising 5 sessions with 1 on Friday evening and 2 on each of Saturday and Sunday.
Each course in total comprises 10 sessions; Students must attend a minimum of 8 sessions to be eligible to be given a grade for the course. Students failing to meet these requirements will be automatically graded 0% Fail (F) on their transcripts.
Assessment DetailSample test questions similar to the online tests are available to students through the Perdisco e-workbook as practise tests. A sample group assignment is provided for viewing on the MyUni website and a sample exam script is printed at the back of the student course workbook.
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 be attached to 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.
Assignment Guidelines including Referencing Details
The Communication Skills Guide will assist you to structure your assignments. A copy of the guide can be downloaded from: http://www.business.adelaide.edu.au/current/mba/download/2009MBACommSkillsGuide.pdf
This publication also provides guidelines on a range of other important communication skills including writing essays and management reports, making oral presentations etc.
In preparing any written piece of assessment for your postgraduate studies it is important to draw on the relevant ‘literature’ to support critical analysis. Also essential is to reference the literature used. Correct referencing is important because it identifies the source of the ideas and arguments that you present, and sometimes the source of the actual words you use, and helps to avoid the problem of plagiarism. (Further information on plagiarism is provided later in this course outline.)
The Harvard system is widely used in the Business School. Guidelines for the use of this style of referencing can be found in the Communication Skills Guide.
Further assistance with referencing is available from the Faculty’s Learning Support Advisors. The contact details are provided on page 6 of the Communication Skills Guide.
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
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- Students with a Disability - Alternative academic arrangements
- Reasonable Adjustments to Teaching & Assessment for Students with a Disability Policy
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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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