FIN450-01 - Derivatives
Syllabus - Spring 2014
Class Meeting Times and Classroom: Tuesday; 6:00 – 8:50 PM; BRYN 132
Instructor:
Tom Wayne, CPA, MBA, CGMA
email: twwayne@uncg.edu
Office / Phone:
BRYN 386 / 336-707-1184
My Office Hours:
Tuesday 9:30 – 10:30 AM, or by appointment on weekends.
Required Text:
John Hull, Fundamentals of Futures and Options Markets, 8th edition, 2014.
Course Notes: Blackboard: https://blackboard.uncg.edu/webapps/portal/frameset.jsp
Course Objectives: This course examines the use of forwards, futures, swaps, options, and related
financial derivatives for hedging, arbitrage, and speculation in the global environment. The course
focuses on understanding how firms manage interest rate risk, exchange rate risk, and commodity price
risk using these derivatives. The emphasis is on understanding the motivation, issues, and techniques
behind financial engineering with these derivatives, as practiced by firms and individuals to maximize
value in global markets.
In English, we want to understand:
1. What these things are and how they work.
2. How they can be used to manage risk.
3. What determines prices (i.e., valuation).
Course Grading: Your course grade will be determined by performance on weekly quizzes, two
exams, four 1-page research projects, and class participation. Late projects will not be accepted and
makeup quizzes and exams will not be given. Conflicts taking quizzes or exams must be resolved prior
to the administration of each quiz or exam. Your lowest quiz score will be thrown out. Grading weights
are provided below.
If at the end of the term you are at the margin between two grades, your contribution to class discussion
throughout the term will determine whether you receive the higher or lower grade. Note that it is the
quality and not simply the frequency of participation that is important.
Homework: Selected cases and problems are assigned at the end of each chapter. These problems
will help you understand the concepts, and will help you prepare for quizzes and exams. Solutions are
available. Selected problems will be worked into classtime when time permits.
Withdrawal Policy: Please consult http://studentsfirst.uncg.edu/appeals/coursewithdrawal.php for the
University’s withdrawal policy.
FIN450 Derivatives:
References:
Tentative Schedule - Spring 2013
Hull;
Fundamentals of Futures and Options Markets, 7th edition, 2011;
Date
Jan 14
Topic
Readings: Chapter Problems
Introduction; Background Info.
Hull- Ch. 1: 1,2,7,10-12,17-21;
Terminology; FAS 133
Glossary (1-2); JOD,JACF,&JFM.
Jan 14
Derivatives Mishaps; Risk Mgt Policies
Hull- Ch. 25.
Jan 21
Mechanics of Futures Markets
Hull- Ch. 2: 1-6,8-16,18,19,21-23.
Jan 28
Hedging Strategies (Proj #1 due)
Hull- Ch. 3: 1-11,13,15-18,20.
Feb 4
Interest Rates
Hull- Ch. 4: 1,3-5,7,12,14,17,19-21
Feb 11
Valuation of Forwards and Futures
Hull- Ch. 5: 1-7,9-12,14,15,17.
Feb 18
Interest Rate Futures
Hull- Ch. 6: 1-7,12,14-18,20.
Feb 25
Midterm Exam
Hull- Ch. 1-6, 25; Intro; Background; Glossary (pp. 1-2).
Feb 25
Interest Rate SWAPs
Hull- Ch. 7 (1st half): 1-12,15-17.
Mar 4
Currency SWAPs (Proj #2 due)
Hull- Ch. 7 (2nd half): 1-12,15-17, Hull, Ch. 8, 9-1
Mar 7
Last Day to Drop Class Without Academic Penalty
Mar 11
NO CLASS: Fall Break
Mar 18
Mechanics of Options (Proj #3 due)
Hull- Ch. 9: 1,2,4-10,13-22.
Mar 25
Properties of Stock Options
Hull- Ch. 10: 1-15,20.
Apr 1
Trading Strategies with Options
Hull- Ch. 11: 1-3,5,6,9,14,15.
Apr 8
Valuation- Binomial (Proj #4 due)
Hull- Ch. 12: 1,2,4-7,9-13,15.
Apr 15
Midterm Exam
Hull- Ch. Ch. 7-12 (No class after exam)
Apr 22
Valuation- Black/Scholes
Hull- Ch. 13: 1,2,4,6,11,13-15.
Apr 22
Real Options
Real Options Notes.
May 6 Cumulative Final Exam (6:00 – 8:50 PM) Hull-Ch. 1-13,25, Real Options.
Important
Dates
Throughout
Jan 28
Mar 4
Feb 25
Mar 18
Apr 8
Apr 15
May 6
Subject
8 Quizzes (6.25 points each)
Futures Project 1
Futures Project 2
Midterm exam #1
Futures Project 3
Options Project 4
Midterm exam #2
Final exam
Total
Points
Possible
50
5
5
40
5
5
40
50
% of
Grade
25.0
2.5
2.5
20.0
2.5
2.5
20.0
25.0
200
100.0
Explanation of Research Projects (THIS MAY CHANGE SLIGHTLY PRIOR TO CLASS –
HOWEVER THIS WILL GIVE YOU A FEEL FOR IT – WE WILL STILL BE USING VIRTUAL
TRADER EVEN IF THE PROJECTS CHANGE SLIGHTLY)
Utilizing the Virtual Trader Tool at CBOE.com, you will write four short research papers (each no
more than 1 page single spaced). In the first research project (Futures Project #1) you will describe the
details of one financial futures contract and one commodity futures contract. In the second research
project (Futures Project #2) you will track the performance of each contract described in Futures
Project #1, along with the underlying assets and a margin account. In the third research project
(Futures Project #3), you will describe how an individual or firm might use a specific futures contract
to hedge, arbitrage, and speculate. In the fourth research project (Options Project #4) you will describe
the details of two pairs of call and put options. The details of what I expect for these four projects will
be provided in separate documents.
UNIVERSITY POLICIES & RESOURCES
• Students are expected to abide by the UNCG’s Academic Integrity Policy and the Student
Code of Conduct:
o Student Conduct: http://studentconduct.uncg.edu/policy/code/
§ This is required reading for all students. To reinforce your understanding of
the policy, the following pledge must be signed by all students at the end of
all exams:
On my honor, I have neither given nor received any unauthorized
aid on this exam. Nor am I aware of anyone giving or receiving any
unauthorized aid on this exam.
Signature:_________________________________ Date:__________
As two examples of how this class will operate to promote the Honor
System: 1. There will be no graphing calculators allowed for any
quizzes or exams. 2. No cell phones are allowed to operate during
class. Ever. Be sure to mute yours and keep it away from yours and
my sight. This is just common courtesy and also will prepare you for
the business world.
•
•
o Academic Integrity Policy: http://academicintegrity.uncg.edu/violation/
o Faculty and Student Guidelines: http://bae.uncg.edu/assets/
faculty_student_guidelines.pdf
Student Disabilities - Any request for special accommodations must come through
the Office of Disability Services with the appropriate paperwork. Please visit http://
ods.dept.uncg.edu/services/for further information.
Students in Distress: UNCG cares about your success as a student. We recognize that
students often balance many challenging personal issues and demands. Please take
advantage of the University resources designed to help. For assistance accessing these
resources, contact the Dean of Students Office at 334-5514 or Student Academic Services at
334-5730. The Counseling and Testing Center is available for mental health assistance, 334-
5874. You may also visit me during my office hours.