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Instructor Class Description

Time Schedule:

Jefferson Duarte
FIN 561
Seattle Campus

Financial Futures and Options Markets

Overview of futures markets and options markets. Analysis of pricing of futures contracts and options; comparison of futures, forward, and options contracts; risk management with hedging; alternative investment strategies; and review of empirical evidence. Prerequisite: MBA Core Finance.

Class description

After completing this course you should be able to:

1) Describe the payoffs and the characteristics of the most commonly negotiated futures, forwards and options contracts on equities and interest rates. 2) Understand the relationship between rates with different compounding periods and describe basic definitions related to the fixed income markets. 3) Apply the concept of arbitrage to identify and explore possible misspricing of popular derivative contracts such as futures, forwards and options. 4) Use future and option contracts to hedge exposure to market and interest rate risk. 5) Apply the concept of duration to hedge a portfolio of fixed income securities. 6) Use the Black and Scholes formula to price options and calculate their hedging ratios. 7) Use the binomial model to price derivatives and calculate their hedging ratios.

Student learning goals

General method of instruction

Recommended preparation

The prerequisite is Fin 509. Some homework assignments will require the use of Excel.

Class assignments and grading

The course requirements consist of problem sets, a midterm in week 6 and a take home final exam. The midterm and the final will be graded from 0 to 40 points. Your course grade is:

(0.5 * final grade + 0.3 * midterm grade + 0.2 * problem sets grade) /10

The information above is intended to be helpful in choosing courses. Because the instructor may further develop his/her plans for this course, its characteristics are subject to change without notice. In most cases, the official course syllabus will be distributed on the first day of class.
Additional Information
Last Update by Jefferson Duarte
Date: 09/26/2002