FINA519-18T (HAM)

Derivatives Two

15 Points

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Waikato Management School
Te Raupapa
School of Accounting, Finance and Economics

Staff

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Convenor(s)

Lecturer(s)

Administrator(s)

: maxine.hayward@waikato.ac.nz

Placement Coordinator(s)

Tutor(s)

Student Representative(s)

Lab Technician(s)

Librarian(s)

: clive.wilkinson@waikato.ac.nz

You can contact staff by:

  • Calling +64 7 838 4466 select option 1, then enter the extension.
  • Extensions starting with 4, 5 or 9 can also be direct dialled:
    • For extensions starting with 4: dial +64 7 838 extension.
    • For extensions starting with 5: dial +64 7 858 extension.
    • For extensions starting with 9: dial +64 7 837 extension.
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Paper Description

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This paper aims to enhance students' ability to understand and analyse derivatives beyond simple futures and options. It also introduces basic research on derivatives to students. Major topics to be covered include Wiener processes, Ito's lemma, the Black-Scholes model, Greek letters, delta hedging strategies, value at risk, GARCH conditional volatility models, and swaps. Students are led to read journal articles, read teaching materials, do in-class presentations, participate in research debate, conduct empirical analyses and write research reports.

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Paper Structure

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The main activities of this paper include:

Lectures

Teaching materials reading

Journal articles reading

In-class research article presentation

Research articles summary

Individual project report

Test

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Learning Outcomes

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Students who successfully complete the course should be able to:

  • Understand the applications of stochastic processes on asset pricing. Students are able to understand the complex pricing mechanism of options such as Black-Scholes model. [LO1]
    Linked to the following assessments:
  • Understand the Greek letters from the BS model that define risk factors to option pricing. Understand trading strategies for risk management using Greek letters of BS model such as delta and gamma hedging. [LO2]
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  • Understand the techniques of risk evaluation such as Value at Risk (VaR). Students are able to understand conditional volatility model such as GARCH. Students are able to illustrate pricing mechanism and properties of swaps . [LO3]
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  • Summarize and evaluate the research papers on the topics relating to option pricing model and related trading strategies, risk evaluation, time-varying volatility, and swaps. [LO4]
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  • Apply the concepts of risk management using options to transaction data and evaluate the performance. [LO5]
    Linked to the following assessments:
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Assessment

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There are four internal assessments for this paper: In-class research article presentation, research paper summary, individual research project report and a final test.

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Assessment Components

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The internal assessment/exam ratio (as stated in the University Calendar) is 100:0. There is no final exam. The final exam makes up 0% of the overall mark.

The internal assessment/exam ratio (as stated in the University Calendar) is 100:0 or 0:0, whichever is more favourable for the student. The final exam makes up either 0% or 0% of the overall mark.

Component DescriptionDue Date TimePercentage of overall markSubmission MethodCompulsory
1. In-class research article presentation
20
  • Presentation: In Class
2. Final Test
13 Dec 2018
1:00 PM
20
  • Hand-in: In Lecture
3. Individual Research Project Report
9 Dec 2018
11:00 PM
30
  • Online: Submit through Moodle
4. Research Paper Summary
12 Dec 2018
11:00 PM
30
  • Online: Submit through Moodle
Assessment Total:     100    
Failing to complete a compulsory assessment component of a paper will result in an IC grade
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Required and Recommended Readings

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Required Readings

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Textbook

Hull, J.C. (2012). Options, Futures, And Other Derivatives. 8th Edition. Pearson Education Limited.

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Recommended Readings

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Hull, J.C. (2015) Options, Futures, And Other Derivatives. 9th Edition. Pearson Education Limited.

Reading list for FINA 519: note that this list contains required textbook, recommended textbook and a pool of research papers for internal assessments.

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Other Resources

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Other teaching materials will be provided online where necessary.

Please contact the Paper Convener for further details.

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Online Support

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All the resources about this paper will be available on Moodle. Research papers are available via Reading List. The online resources may be updated where necessary.
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Workload

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There are 150 learning hours for this paper. They will be spent on the following activities:

Attend lectures

Read teaching materials and research articles

Prepare for and do the research article presentations

Write research summary and research project report

Prepare for and sit the final test

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Linkages to Other Papers

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Note any linkages to other papers where the linkage is of importance.
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Prerequisite(s)

Prerequisite papers: FINA412, FINA502 or FINA509

Corequisite(s)

Equivalent(s)

Restriction(s)

Restricted papers: FINA529

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