CORPFIN 7023 - Financial Modelling Techniques (M)
North Terrace Campus - Semester 2 - 2017
General Course Information
Course Code CORPFIN 7023 Course Financial Modelling Techniques (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 Available for Study Abroad and Exchange Y Prerequisites ACCTING 7019, CORPFIN 7005, COMMERCE 7033 Corequisites ECON 7200 Course Description The course deals with discrete time financial modelling of various financial assets, interest rates, exchange rates. It will deal with the hedging and valuation of financial products (derivative products), the modelling of yield curves and interest rate management. The emphasis will be on practical modelling, real world applications, conforming with market models used in the financial industry at the current time. Binomial lattice type models, with implementation of spreadsheets, Ho and Lee type term structure models for interest rates and their application to interest rate risk management.
Course Coordinator: Adjunct Professor David Clements
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. demonstrate an understanding of basic financial market concepts
2. construct binomial tree models
3. price a wide variety of contingent claims using principles of non-arbitrage
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 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 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
2,3 Career and leadership readiness
- technology savvy
- professional and, where relevant, fully accredited
- forward thinking and well informed
- tested and validated by work based experiences
Recommended Resources1. Binomial Models in Finance by J Van Der Hoek and R Elliot, Cambridge
2. Elementary Calculus of Financial Mathematics by Roberts, Cambridge
3. Options Futures and Other Derivatives 7th ed. by Hull, Pearson
Online LearningThis course uses MyUni exclusively for providing electronic resources, such as lecture notes, assignments, sample solutions etc.
Learning & Teaching Activities
Learning & Teaching ModesThis course relies on lectures as the primary delivery mechanism for the material. Tutorials supplement the lectures by providing exercises and sample problems. A sequence of of written assignments provides the assessment opportunities for students to gauge their progress and understanding.
The information below is provided as a guide to assist students in engaging appropriately with the course requirements.
Activity Quantity Workload Hours Lectures
Learning Activities SummaryLecture Outline
1. Call options - European
2. Call options - American
3. Binomial assett pricing model
4. Price derivatives using risk neutral probabilities
5. Forward contracts
6. Multipstep binomial models (2 lectures)
7 Arrow-Debreu securities and state prices (2 lectures)
8. Cox-Ross-Rubibstein (CRR) convergence, Black Scholes formula (2 lectures)
9. Calculations with the Black-Scholes formula (2 lectures)
10. Generalise multistep models
11. Pricing American options with CRR multistep model
12. Barrier options
13. Forward commodity contracts
14. Forward currency contracts (2 lectures)
15. Interest rate derivatives (2 lectures)
16. Ho and Lee model for interest rates (2 lectures)
17. Futures markets (2 lectures)
18. Hedging and contingent claims (2 lectures)
19. Sensitivity of options (2 lectures)
20. Options with dividend paying assets
21. Review lecture
1. Call options, one-step binomial pricing model
2. CRR model
3. Three-step CRR model and Arrow-Debreu prices
4. Pricing American options in a two-step CRR model
5. The ‘Greeks’ and delta hedging
1. One-step binomial model
2. Two-step CRR model, Black-Scholes model
3. Pricing American options using the CRR model
4. Forward and futures contracts
5. Delta hedging, Ho-Lee model
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 Weighting Learning Outcome Assignments 30% All Exam 70% All Total 100%
Assessment Related RequirementsAn aggregate score of at least 50% is required to pass the course.
Assessment Task Distributed Due Weighting Assignment 1 Week 2 Week 3 6% Assignment 2 Week 4 Week 5 6% Assignment 3 Week 6 Week 7 6% Assignment 4 Week 8 Week 9 6% Assignment 5 Week 10 Week 11 6%
Submission1. All written assignments are to be submitted to the designated hand-in boxes. within the School of Mathematical Sciences with a signed cover sheet attached.
2. Late assignments will not be accepted.
3. Assignments will have a two week turn-around time for feedback to students.
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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