BBA International Program
Thammasat Business School
1. Course Title:
2. Course Credits:
3. Prerequisite:
4. Course Description:
5. Course Objectives:
FN452-BBA-2-2014
TQF3 Course Specification
BBA International Program
Thammasat Business School
Thammasat University
TQF3 Course Specification
(Curriculum 2009) FN 452 Financial Derivatives
(Curriculum 2013) FN 452 Financial Derivatives Analysis
3 Credits (3-0-6)
(Curriculum 2009) FN 312
(Curriculum 2013) Have earned credits o FN 312
(Curriculum 2009)
The course covers fundamental knowledge of Futures and Forward
contracts, Options, Warrants, and Swaps. Discussion includes derivatives
pricing models and selection of appropriate strategies for speculating or
hedging.
(Curriculum 2013)
Fundamental principles of derivatives, including futures, forward contracts,
options, warrants, and swaps, derivatives pricing models, strategies for
speculating or hedging.
Derivatives have become a popular investment tool over the last three
decades. The notional amount of derivative contracts traded on the OTC
market alone has exceeded $600 trillion in the year 2012. Many companies
routinely use derivatives to hedge risks and to compensate employees.
Moreover, since many financial transactions and investment decisions today
contain some derivative-like features, the materials covered in this course
should be useful to students planning a career in asset management,
corporate finance, investment banking, sales and trading, financial
consulting or any other fields that involve financial decision making.
This course is designed to achieve two main objectives. The first objective is
to provide students with a framework to understand the fundamental
concepts and to develop the necessary skills used in valuing derivative
contracts. This will include emphasis on the key concept of “No Arbitrage
Principle”, and on the two work horses of the binomial model and the BlackSholes-Merton model. The second objective is to apply the framework to
understand a wide variety of issues related to risk management.
6. Date of Latest
Course Revision:
7. Purposes of
Course Revision:
8. Semester/
Academic Year:
9. Date & Time & Venue:
10. Instructor:
11. Course Co-ordinator
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December 24, 2012
The course is revised regularly to ensure the relevance of the courses to the
business world. The contents are updated so that it is of the benefits of the
students in their future studies or future careers.
2/2014
Date:
Time:
Venue:
Name:
Office:
Email:
Office Hours:
Name:
Email:
Thursday
9.00 a.m.– 12.00 noon.
208
Dr. Sutee Mokkhavesa
TBA
drsutee@gmail.com
1 hour after class.
TBA
TBA
BBA International Program
Thammasat Business School
12. Teaching Assistant:
13. Hours Employed
per Semester:
14. Main Texts:
15. Recommended Texts
& Materials:
16. Learning Outcomes:
1. Morality and Ethics:
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Name:
Email:
Lecture
TBA
TBA
Supplemental
Classes
FN452-BBA-2-2014
TQF3 Course Specification
Laboratory/
Self-Study
Field Work/
Internship
45 hours
0 hours
0 hours
90 hours
th
Hull, J. Options, Futures, and Other Derivatives(9 Edition)
ISBN-10: 0133456315, ISBN-13: 978-0133456318
©2014 - Prentice Hall - Published 25/01/2014
nd
1. Neftci, S. Principles of Financial Engineering (2 Edition)
2. Wilmott, P. Derivatives; The Theory and Practice of Financial Engineering
John Wiley & Sons. 1998
3. Das, S. Traders, Guns and Money FT Printice Hall. 2006
Useful links are provided below
www.wilmott.com
www.quantnet.com
The five learning outcomes are stated below:
Expected outcomes on morality and ethics:

1.1 Possess honesty, sacrifice, self-, social-, and
environmental responsibility.
N/A
1.2 Value “sufficiency” theory and adapt it in life path by
adhering to adequacy, rationale, and immunity
development.

1.3 Value disciplines, respect, and comply with the rules
and regulations of the institution and society at large.

1.4 Acquire knowledge related to business morality and
ethics, and be able to handle ethical dilemma with
integrity.
Teaching methods:
Discussion on the misuses of financial derivatives and its catastrophic
consequences.
Evaluation methods:
Assignments based on the case studies of financial losses caused by financial
derivatives due to misuses, fraud, and erroneous models.
BBA International Program
Thammasat Business School
2.
Knowledge:
3.
Intellectual
Development:
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FN452-BBA-2-2014
TQF3 Course Specification
Expected outcomes on knowledge:
N/A
2.1 Acquire knowledge on and understand the important
concepts in business management.

2.2 Acquire knowledge on and understand the important
social and science concepts related to business
management.

2.3 Acquire knowledge on and understand the important
concepts related to business processes, planning,
corporate structures, operations, control, performance
evaluation and contingency plan to suit the
circumstances.

2.4 Acquire the knowledge on academic advancement and
professional development in business management
including the understanding of the situational
adaptability and its impacts on business.
Teaching methods:
Discussion on the various ways in which derivatives are used by financial
institutions.
Lecture on different types of derivatives.
Lecture on the pricing of these derivatives and the concept of no-arbitrage.
Evaluation methods:
Take quiz on the application of financial derivatives.
Take exam on the pricing of financial derivatives.
Expected outcomes on intellectual development:

3.1 Be able to search and process information and utilize
various concepts appropriately in a given circumstance.

3.2 Be able to think systematically and rationally and to
integrate knowledge from other disciplines to solve the
problems in business and other settings.

3.3 Be able to collectively propose solutions to problems at
hand and analyze the impacts of the proposed solutions
and be able to choose the solution that is appropriate to
a given situation to ensure business competitive
advantages.
Teaching methods:
Describe the scientific method in solving financial problems
Derivative pricing can be quite challenging to the students since it requires a
significant amount of technical know-how. The students must first learn the
underlying concept and the mathematical tools before they can be used to
derive the B-S-M partial differential equation.
Evaluation methods:
Examination on Black-Scholes-Merton model.
BBA International Program
Thammasat Business School
4.
Interpersonal Skills
and Responsibilities:
5.
Quantitative Analysis,
Communication and
Information
Technology:
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FN452-BBA-2-2014
TQF3 Course Specification
Expected outcomes on Interpersonal Skills and Responsibilities:

4.1 Be able to work in team, possess interpersonal skills and
leadership skills, and be professionally adaptive to a
given situation.
N/A
4.2 Be creative and constructively criticize to solve problem
of the team.
N/A
4.3 Be responsible for self-learning and professional
development.
Teaching methods:
Group Assignments are used to improve interpersonal skills and encourage
self-learning.
Evaluation methods:
Class presentations
Expected outcomes on Quantitative Analysis, Communication and
Information Technology:

5.1 Be able to apply mathematics, statistics, quantitative
analysis in analyzing and making decisions in business
and daily life.
N/A
5.2 Be able to efficiently communicate in Thai and foreign
languages that are relevant in doing business.
N/A
5.3 Be able to explain the issues and make the issues clear
in verbal or writing, and be able to choose the
appropriate pattern of communication for different
groups of audience both in business context and in
other contexts.
N/A
5.4 Be able to utilize the information technologies or others
to support the business operations.
Teaching methods:
The technical nature of this course will imbue the importance of
mathematical analysis to this field of finance.
Evaluation methods:
Quizzes and Examination
BBA International Program
Thammasat Business School
17. Evaluation Plan:
FN452-BBA-2-2014
TQF3 Course Specification
The evaluation plan for this course is stated as follows:
Expected
Methods/Activities
Week
Outcomes
Evaluated
1.1, 2.2, 2.4, 5.1
Midterm
8
1.3, 2.2, 2.4, 5.1
Final
16
1.1, 2.2, 2.4, 5.1
Quiz
All
1.3, 3.1,
Project
13
3.2,3.3,4.1, 5.1
Weights
Assigned
35%
45%
10%
10%
100%
18. Course Schedule:
Session/Date & Time
#1: 09:00-12:00 15.01.15
#2: 09:00-12:00 22.01.15
#3: 09:00-12:00 29.01.15
#4: 09:00-12:00 05.02.15
#5: 09:00-12:00 12.02.15*
#6: 09:00-12:00 19.02.15
#7: 09:00-12:00 26.02.15
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The course schedule for this course is stated as follows:
Topics
Activities/
Text&Materials/
Media
Overview of Financial Engineering
Lecture
Derivatives Market
Discussion
Mechanics of Futures
Lecture
 Specification of futures contract Discussion
Practice
 Price convergence
 Forwards vs Futures
Futures Hedging
Quiz
Lecture
 Basic Principles
Discussion
 Argument for hedging
Practice
 Cross hedging
 Stock index futures
Interest Rates
 Types of rates
 Zero rates
 Bond Pricing
 Forward rates
 FRA
 Duration and Convexity
Forwards and Futures Prices
 Investment vs Consumption
assets
 Short selling
 Forward price for an investment
asset
 Valuing forward contract
 Futures prices of stock indices
 The cost of carry
Interest Rate Futures
 Day count and quotation
conventions
 Treasury bond futures
 Duration-based hedging
strategies
Swaps
 Mechanics of swaps
 Comparative-advantage
argument
 Valuation of interest rate swaps
 Credit risk
Quiz
Lecture
Discussion
Practice
Quiz
Lecture
Discussion
Practice
Quiz
Lecture
Discussion
Practice
Quiz
Lecture
Discussion
Practice
BBA International Program
Thammasat Business School
#8: 09:00-12:00 12.03.15
#9: 09:00-12:00 19.03.15
#10: 09:00-12:00 26.03.15
#11: 09:00-12:00 02.04.15
#12: 09:00-12:00 09.04.15
#13: 09:00-12:00 23.04.15
#14: 09:00-12:00 30.04.15
#15: 09:00-12:00 07.05.15
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Mechanics of Option Prices
 Types of options
 Options positions
 Underlying asset
 Specification
 Trading
 OTC markets
Trading Strategies
 Single option and stock
strategies
 Spreads
 Combinations
 Other payoffs
Properties of Option Prices
 Factors affecting prices
 Assumptions
 Put-Call parity
 Early Exercise issue
Wiener Process and Ito’s Lemma
 Markov Property
 Continuous time stochastic
process
 Process of stock price
 Ito’s lemma
 The Lognormal property
Black Scholes Merton Model
 The main idea
 Derivation of B-S-M Model
 Solution to the Partial
Differential Equation
Greek Letters
 Naked and covered position
 Stop-loss strategy
 Delta Hedging
 Theta
 Gamma
 Vega
 Rho
 The realities of hedging
Exotic Options
 Packages
 Chooser option
 Barrier option
 Binary option
 Lookback option
 Shout option
 Asian option
Derivatives Mishaps
 Lessons for all users of
derivatives
FN452-BBA-2-2014
TQF3 Course Specification
Quiz
Lecture
Discussion
Practice
Quiz
Lecture
Discussion
Practice
Quiz
Lecture
Discussion
Practice
Quiz
Lecture
Discussion
Quiz
Lecture
Discussion
Practice
Quiz
Lecture
Discussion
Practice
Quiz
Lecture
Discussion
Quiz
Lecture
Discussion
BBA International Program
Thammasat Business School
19.1 Details on Assignment
19. 2 Details on Project
20. Notes to Students:
FN452-BBA-2-2014
TQF3 Course Specification
The details for the assignment are stated as follows:
Assignments will be giving out in class. Late submissions will result in an
automatic 25% reduction of your score.
Video Project
(1) Form a group of 7 or less, and assign a Group Manager (GM).
(2) The list of eligible topics will be given in the second period.
(3) Each group must conduct a detailed analysis of the topic assigned
and create a 15 mins video on the topic.
(4) Points will be awarded for origination, ease of understanding and
level of engagement.
To gain the full benefit of this course, it is highly recommended that
students spend at least 2 hours to read the relevant material in the required
text before lecture.
The academic calendar is stated below:
21. Academic Calendar:
Academic Schedule of Semester 2/2014:
(January 12, 2015 - May 26, 2015)
Important Dates
Semester Begins
Period of Withdraw W/O Record
Makha Bucha Day*
Period of Midterm Examination
Period of Withdraw with "W"
Chakri Memorial Day*
Songkran Festival Day*
Last Day of Classes
Period of Final Examination
Coronation Day*
Royal Ploughing Ceremony Day*
Note *Public Holiday
Schedule
January 12, 2015
January 21 - 26, 2015
March 4, 2015
March 1 - 8, 2015
March 16 - 27, 2015
April 6, 2015
April 11 - 17, 2015
May 9, 2015
May 12 - 26, 2015
May 5, 2015
TBA
The regulations on the class attendance is stated below:
22. Attendance:
Important Notes to Students Regarding Class Attendance
Announced by BBA International Program:
a. Students who miss more than 13 hours of class but less than 22 hours must seek instructor’s approval
for eligibility to take the final exams and approval by the dean. The dean’s decision is considered final.
b. Students who miss more than 22 hours of class are NOT eligible to take the final exams and results in
course failure.
Please note that feigning other student signatures or failure to attend class after signing in results different
level of penalty imposed.
o Level 1 penalty: First time rule breakers will be considered as “Absent” for that actual class time. And a
warning letter issued to first-time rule breakers.
o Level 2 penalty: Second time rule breakers receive an “F” for the course and will not be considered for
BBA scholarships, exchange student programs and other awards.
o Level 3 penalty: Third-time rule breakers are given one semester of class suspension.
Cheating in any form of class exam or quiz or plagiarism is subject to the penalties based on Thammasat
University’s student compliance act.
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BBA International Program
Thammasat Business School
23. Course and Teaching
Evaluation and
Improvement:
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FN452-BBA-2-2014
TQF3 Course Specification
The Program has set policies related to course and teaching evaluation and
improvement as follows:
1. Strategies for course evaluation by students:
There will be two evaluations per course: Mid-semester and end-ofsemester course evaluations. The course evaluation will be administered by
BBA staff with the instructor absent from the classroom. The instructor will
receive feedback from students in the following key areas:
 Class preparation
 Teaching capability
 Appropriateness of activities or assignments
 Encouragement of Class discussion
 Opportunity to ask questions
 Encouragement of independent study and additional practices
 Benefits of the course
Course evaluation will be summarized and returned to the instructor after
the grades are sent to the Program. Moreover, the course evaluation of
each instructor of every course offered will be reviewed by BBA Operating
Committee.
2. Evaluation strategies in teaching methods:
The effectiveness of teaching methods will be evaluated from the students’
accomplishments such as participation, assignments, and exams.
3. Improvement of teaching methods:
The instructor will use the feedbacks from 2. above to improve the teaching
methods.
4. Evaluation of students’ desire learning outcomes:
After receiving the feedback from the mid-semester course evaluation and
students’ assessments, the instructor revises the teaching methods to
ensure that the desired learning outcomes are achieved.
5. Review and improvement for better outcomes:
A summary of course evaluation for each course will be supplied to course
instructor. The Program will use the feedback to improve the curriculum
structure and course content in the regular curriculum revision cycle.