CORPFIN 7023 - Financial Modelling Techniques (M)

North Terrace Campus - Semester 2 - 2018

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.

  • General Course Information
    Course Details
    Course Code CORPFIN 7023
    Course Financial Modelling Techniques (M)
    Coordinating Unit Adelaide 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
    Assessment Exam/assignments/tests/tutorial work as prescribed at first lecture
    Course Staff

    Course Coordinator: Dr Judith Bunder

    Course Timetable

    The full timetable of all activities for this course can be accessed from Course Planner.

  • Learning Outcomes
    Course Learning Outcomes
    On 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)
    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
    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
    Career and leadership readiness
    • technology savvy
    • professional and, where relevant, fully accredited
    • forward thinking and well informed
    • tested and validated by work based experiences
  • Learning Resources
    Required Resources
    Recommended Resources
    1. 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 Learning
    This course uses MyUni exclusively for providing electronic resources, such as lecture notes, assignments, sample solutions etc.
  • Learning & Teaching Activities
    Learning & Teaching Modes
    This 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
    Total 156
    Learning Activities Summary
    Lecture 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

    Tutorial Outline

    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

    Assignment Outline

    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
  • Assessment

    The University's policy on Assessment for Coursework Programs is based on the following four principles:

    1. Assessment must encourage and reinforce learning.
    2. Assessment must enable robust and fair judgements about student performance.
    3. Assessment practices must be fair and equitable to students and give them the opportunity to demonstrate what they have learned.
    4. Assessment must maintain academic standards.

    Assessment Summary
    Assessment Task Weighting Learning Outcome
    Assignments 30% All
    Exam 70% All
    Total 100%
    For specific due dates please see MyUni.
    Assessment Related Requirements
    An aggregate score of at least 50% is required to pass the course.
    Assessment Detail
    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%
    1. 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.
    Course Grading

    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.

  • Student Feedback

    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 ( 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.

  • Student Support
  • Policies & Guidelines
  • Fraud Awareness

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