Course Outline FD (1.5)
Course Outline FD (1.5)
Course Outline FD (1.5)
After going through the course, the students would be able to:
Course Outcome 2 (CO2): Apply the tools and techniques for pricing and valuation of basic
derivative instruments (forwards & futures, options, and swaps).
Course Outcome 3 (CO3): Make use of financial derivatives for risk management/hedging
and speculation.
4. PEDAGOGY
The course will be primarily taught through a combination of class lectures, MS excel
worksheets, discussions, numerical problems, case analysis, assignments, and term-long
project. The class discussion will involve the readings assigned for the class, which may
include book chapters, articles, and cases. You are expected to have done all the assigned
reading and to actively participate in these discussions. The missed quizzes shall not be made
up under any circumstances and you will receive zero points.
5. COURSE EVALUATION COMPONENTS (CECs)
Component 1: Quizzes (30%)
The quizzes will be compulsory and will be spread across the entire course. If any student
misses any quiz, no makeup quiz will be given later.
Component 2: Class participation (10%): Students will be evaluated for their active
contribution in class discussions, relevance of contribution and overall conduct during classes.
7. RESOURCES
7.1 Textbook
John C. Hull, Fundamentals of Futures and Options Markets, Pearson. Latest Edition (9 th
Edition). ISBN: 9789352865635 (Hull, hereafter)
John C. Hull and Sankarshan Basu, Options, Futures, and Other Derivatives, 8th edition,
Pearson
7.3 Online References (if any)
• nseindia.com
• isda.org
Tentative Class Schedule
(Additional readings, cases, and articles may be assigned as required)
Session Topics Pedagogy Readings
1-2 Introduction to Financial Lecture, Discussion, Chapters 1, 2
Derivatives Problem-solving, Excel- (Hull)
• Mechanics of Forward & modelling
Futures Market
• Forward and Futures Contracts
• Over-the-Counter Market
• Hedgers, Speculators, and
Arbitrageurs
• Forward and Futures: A
comparison
• Specifications of a Futures
Contract
• Understanding Market Quotes
• Long Futures & Short Futures
Payoff
3-4 Pricing of Forward and Futures Lecture, Discussion, Chapters 3, 5
• Margining in Futures Problem-solving, Excel- (Hull)
• Short Hege, Long Hedge modelling
• Cross Hedging
• Hedge Ratio
• No Arbitrage Pricing of Futures
• Cost-of-Carry and Convenience
Yield
5-6 Mechanics of Option Markets Lecture, Discussion, Chapters 9,
• Types of Option Problem-solving, Excel- 10 (Hull)
• Option Positions Modelling
• Specifications of an Option
Contract
• Call & Put Payoffs
• No Arbitrage Pricing of Option
• Risk-Neutral Approach
a) Plagiarism is the use of or presentation of ideas, works that are not one’s own and which are
not common knowledge, without granting credit to the originator. Plagiarism is unacceptable
in IMI and will invite penalty. Type and extent of penalty will be at the discretion of the
concerned faculty.
b) Cheating means using written, verbal or electronic sources of aid during an examination/ quiz/
assignment or providing such assistance to other students (except in cases where it is expressly
permitted by the faculty). It also includes providing false data or references/list of sources which
either do not exist or have not been used, having another individual write your paper or
assignment or purchasing a paper for one’s own submission. Cheating is strictly prohibited at
IMI and will invite penalty as per policies of the Institute.