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Oggetto:

Derivatives

Oggetto:

Derivatives

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Academic year 2020/2021

Course ID
MAN0525
Teachers
Eleonora Isaia (Lecturer)
Massimo Giorgini (Lecturer)
Degree course
BUSINESS ADMINISTRATION - Curriculum: Finance and Accounting
Year
2nd year
Teaching period
First Term
Type
Elective
Credits/Recognition
5
Course disciplinary sector (SSD)
SECS-P/11 - economia degli intermediari finanziari
Delivery
Formal authority
Language
English
Attendance
Obligatory
Type of examination
Written
Prerequisites
Advanced Capital Markets must be successfully completed
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Sommario del corso

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Course objectives

The course is designed for students interested in a career in financial markets. The purpose of the course is to teach students how to interpret and value the wide variety of derivatives products available for trading, including futures, options and forward contracts on equities interest rates and indices. These instruments have become extremely popular investment tools over the past several decades, as they are used by investors to hedge or increase the exposure to risks associated with changes in interest rates, exchange rates, stock prices, commodity prices, etc. The course shows how derivatives are used to achieve various hedging and speculating objectives, and introduces a basic framework for pricing derivatives.

The course will address the following topics: mechanics and hedging strategies of futures markets, determination of forward and futures prices, mechanics of options markets, properties of stock options and options trading strategies, options valuation, options sensitivity (Greeks), volatility smiles.

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Results of learning outcomes

Students should demonstrate knowledge and understanding of how derivatives markets work. Learning should be ‘critical’ and active class participation is required. Students should have a good knowledge of basic finance concepts including risk and return, arbitrage, efficient markets, stock exchanges, stocks and bonds trading. Basic knowledge of statistics help.

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Program

  • Introduction
  • Mechanics of futures markets
  • Hedging strategies using futures
  • Determination of forward and futures prices
  • Securitization and the credit crisis of 2007
  • Mechanics of options markets
  • Properties of stock options
  • Trading strategies using options
  • Valuing stock options: the Black-Sholes-Merton model
  • The Greek letters
  • Volatility smiles
  • Exotic options and other non-standard products
  • Credit derivatives
  • Swaps_Interest rate swaps
  • Interest rate options
  • Interest rate futures
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Course delivery

The course is developed in 35 hours of lessons of theory complemented by exercises and discussion on real cases. Software for derivative pricing (DERIVAGEM and others) is part of the program, spreadsheets discussed in class will made available on the class website.

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Learning assessment methods

The assessment method consists in a written examination. Students will have 1 hour of time. Questions will consist in questions based on theory as well quantitative exercises. The questions will be similar to the problems discussed in class.

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Support activities

The lecturer suggests and provides students with interesting and recent articles, going beyond the simple program of the course. Where possible, information providers will be used to observe derivatives markets in real-time and how asset prices change when additional information flows to market participants.

TA support is also provided.

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Suggested readings and bibliography

  • John C. Hull, “Fundamentals of Futures and Options Markets,” Global (8th) Edition, Pearson
  • Additional documentation will be provided by the Professors during the course
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Notes

The teaching activities modalities may vary according to the limitations imposed by the current health crisis. In any case, lectures will be online throughout the academic year.

 

Le modalità di svolgimento dell'attività didattica potranno subire variazioni in base alle limitazioni imposte dalla crisi sanitaria in corso. In ogni caso è assicurata la modalità a distanza per tutto l'anno accademico.

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