Stevens Institute of Technology
Howe School of Technology Management
Syllabus
MGT 628
Derivatives
Semester: 2014
Instructor Name & Contact Information:
Day of Week/Time:
Office Hours:
Class Website:
Course Overview
This course covers the fundamentals of financial derivatives, including the basic properties and
the pricing of futures, options and swaps. It also explores trading and hedging strategies
involving financial derivatives. Special topics, such as exotic options and credit derivatives, are
explored. The course provides the foundation of financial derivatives and lays the ground for a
rigorous risk management course and other advanced quantitative courses, such as stochastic
finance.
Prerequisites: Mgt 623
Course Objectives
The course provides an in-depth analysis of derivatives characteristics, pricing and hedging
practices. It provides the foundation of financial derivatives and lays the ground for advanced
quantitative courses, such as stochastic finance and risk management. Finally, the course covers
derivatives topics required for the CFA exam, benefiting students planning to take the CFA
exam. Finally, the final project will give students the opportunity to collaborate and explore one
of the topics discussed in class in further depth.
Additional learning objectives include the development of
Technology Role in Business: Students will apply the concepts learned in the course using data
provided in the Hanlon lab.
Analytical Problem Solving Skills: Students will learn the fundamentals of derivatives and
master pricing models. They will learn how to design and implement portfolio hedging strategies
using derivatives.
Course Outcomes
After successfully completing this course students will be able to:
 Describe how options, futures and swaps function.
 Implement option pricing models, such as Black & Scholes and Binomial Trees.
 Estimate implied volatility smiles.
 Implement pricing models using binomial trees.
 Describe the pros and cons of the use of derivatives for speculative investing.
 Design and implement portfolio trading and hedging strategies using derivatives.
Pedagogy
Required Text(s)
Options, Futures and Other Derivatives, 8th Edition, Hull, Prentice Hall,
ISBN-10: 0132777428
Required Readings
Additional Readings
Assignments
Homework
Class work
Mid-term Exam
Final Exam
Final Group Project
10%
5%
40%
30%
15%
2
Ethical Conduct
The following statement is printed in the Stevens Graduate Catalog and applies to all
students taking Stevens courses, on and off campus.
“Cheating during in-class tests or take-home examinations or homework is, of course,
illegal and immoral. A Graduate Academic Evaluation Board exists to investigate
academic improprieties, conduct hearings, and determine any necessary actions. The
term ‘academic impropriety’ is meant to include, but is not limited to, cheating on
homework, during in-class or take home examinations and plagiarism.“
Consequences of academic impropriety are severe, ranging from receiving an “F” in a
course, to a warning from the Dean of the Graduate School, which becomes a part of the
permanent student record, to expulsion.
Reference:
The Graduate Student Handbook, Academic Year 2003-2004 Stevens
Institute of Technology, page 10.
Consistent with the above statements, all homework exercises, tests and exams that are
designated as individual assignments MUST contain the following signed statement
before they can be accepted for grading.
____________________________________________________________________
I pledge on my honor that I have not given or received any unauthorized assistance on
this assignment/examination. I further pledge that I have not copied any material from a
book, article, the Internet or any other source except where I have expressly cited the
source.
Signature ________________
Date: _____________
Please note that assignments in this class may be submitted to www.turnitin.com, a webbased anti-plagiarism system, for an evaluation of their originality.
3
MGT 628 CLASS SCHEDULE
Weeks
1
Topic Covered/Readings/Assignments
Chapter 1
Introduction to
financial derivatives
2
Forwards and Futures
Chapters 2,3
3
Trading Futures,
Interest Rate Futures
(if time permits)
Chapters 5, 6
(if time permits)
4
Swaps & The
Financial Crisis
Midterm 1
Option markets and
the properties of
equity options
Option markets and
the properties of
equity options
Chapters 7
(Selected topics)
7
Trading strategies
with Options
Chapter 10
8
Option Pricing:
Binomial Model
Chapter 11, 12(if
time permits)
9
Option Pricing: BlackScholes Model
Chapter 13
5
6
11
Midterm 2
Volatility Smile
Options with Stock
Indices, Currencies
and Futures
12
The Greeks
10
Homework Problems
on Futures
Chapter 8
Chapter 9
Chapter 18
Chapter 15
Homework Problems
on equity options
properties, i.e. 9.3,
9.7, 9.10, 9.14, 9.16
Homework Problems
on Trading strategies
using options, i.e.
10.4, 10.8, 10.10,
10.12, 10.16
Homework Problems
on the Binomial
Model, i.e. 11.1, 11.4,
11.9, 11.12, 11.13,
12.13
Homework problems
on Black and Scholes,
i.e. 13.4, 13.7, 13.8,
13.14, 13.15, 13.21
Homework problems
on Derivatives on
Equity Indices and
Currencies, i.e. 15.3,
15.7, 15.12,
15.17,15.18,15.25
Chapter 17
4
13
Hedging strategies
using options
14
Special Topics: Exotic
options, Credit
Derivatives
15
Final Exam
Chapter 17
Topics from Chapters 22,
23,24 (Selected topics if
time permits)
Homework problems
on Greeks and
hedging strategies,
i.e. 17.3, 17.8, 17.14,
17.16, 17.22, 17.25.
Final Project Due*
5