DERIVATIVE SECURITIES (4 SCU)

Learning Outcomes:

Students should comprehend the nature and pricing of option contracts together with their uses in portfolio management and risk reduction strategies; demonstrate what a futures contract is, how futures markets are organized, and the determinants of futures prices; interrelate the system of deposits, margins, and the marking-to-market used by futures exchanges; interpret and explain speculation and hedging strategies using futures contracts, inclusive of reasons for imperfection; define the features of the major financial contracts traded on the Sydney Futures Exchange and analyze the speculation and hedging strategies using their futures contracts; explain the uses of forward-rate agreements; identify the major types and characteristics of options, distinguish between options and futures, and expound the factors that affect option prices; apply basic option pricing theorems, including put-call parity; examine the Black-Scholes and binomial option pricing models and how they are used to calculate option prices; explain the characteristics and uses of foreign currency options; work individually or in teams to analyze and communicate investment information leading to independent investment decision making; and evaluate different financial paradigms and outcomes to inform and direct personal and professional learning.

Topics:

It covers an analysis of derivative securities, binomial option pricing, put-call parity for stock options, and the like.

Prerequisite(s): None