FINAN519-20B (HAM)

Derivatives

15 Points

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Division of Management
School of Accounting, Finance and Economics

Staff

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Convenor(s)

Lecturer(s)

Administrator(s)

: denise.martin@waikato.ac.nz

Placement/WIL 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, 9 or 3 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.
    • For extensions starting with 3: dial +64 7 2620 + the last 3 digits of the extension e.g. 3123 = +64 7 262 0123.
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Paper Description

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This paper covers options, forward contracts, futures contracts, and swaps. By the end of this course you will have a good knowledge of how these contracts work, how they are used, and how they are priced.

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Paper Structure

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The paper will be taught through lectures and tutorials and students’ performance will be evaluated by Assignments, Midterm Test and End-of-term Test.

There will be a series of lecture videos uploaded every week and a weekly live Q&A session with the subject lecturer. Physical Workshops will be available to attend for students starting from week 2 of the semester. These workshops can be joined remotely, and recordings will be made available online.

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Learning Outcomes

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Students who successfully complete the course should be able to:

  • Understand why we trade derivative securities [L01]

    Understand why we trade derivative securities (e.g., forward, futures and option), how these contracts work and how they are used.

    Linked to the following assessments:
  • Understand how to establish trading strategies using forward/futures contracts [L02]
    Learn how to hedge risks, to speculate and to lock in an arbitrage profit via forward and futures contracts.
    Linked to the following assessments:
  • Determine valuation of forward/futures contracts [L03]

    Learn how to price forward and futures contracts.

    Linked to the following assessments:
  • Realize trading strategies and valuation of swaps [L04]

    Understand how swap contracts work, how they are used, and how they are priced.

    Linked to the following assessments:
  • Understand different trading strategies using option contracts [L05]

    Learn how to hedge risks, to speculate and to lock in an arbitrage profit via option contracts.

    Linked to the following assessments:
  • Determine valuation of option contracts [L06]

    Learn how to price option contracts (e.g., binomial trees, and the Black-Scholes model).

    Linked to the following assessments:
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Assessment

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To be eligible to pass this paper, students must achieve an overall grade of at least 50% in the whole paper.

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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. Assignment 1
20 Aug 2020
5:00 PM
20
  • Online: Submit through Moodle
2. Midterm test
17 Aug 2020
5:00 PM
30
  • Online: Submit through Moodle
3. End-of-term test
15 Oct 2020
11:00 AM
30
  • Online: Submit through Moodle
4. Assignment 2
30 Oct 2020
5:00 PM
20
  • 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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Fundamentals of Futures and Options Markets, by John C. Hull, Sirimon Treepongkaruna, Richard Heaney, David Pitt, and David Colwell. Pearson.

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Recommended Readings

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For additional readings of this paper, refer to Waikato Reading List (https://rl.talis.com/3/waikato/lists/3D9E1B61-3399-2C23-2C82-4EC0D7A17C71.html?lang=en-GB): note that this list contains a pool of research papers for lectures and internal assessment.

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Other Resources

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Other teaching materials will be provided online via Moodle where necessary.

Please contact the Paper Convenor 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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The course has 48 (4 X 12) contact hours (online lectures and tutorials/workshops). The rest of the 200 hours expected workload in this 15 point paper can be distributed as follows: 50 hours to prepare for and complete the Assignments, 42 hours to prepare for the Midterm Test and 60 hours to prepare for the End-of-term Test.

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Linkages to Other Papers

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PREREQUISITE(S)

Prerequisite papers: FINA311 or FINA312

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Prerequisite(s)

Corequisite(s)

Equivalent(s)

Restriction(s)

Restricted papers: FINA519

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