FIN803 Derivatives

School of Business Administration in Karvina
Summer 2007
Extent and Intensity
1/2/0. 6 credit(s). Type of Completion: z (credit).
Guaranteed by
Department of Finance and Accounting – School of Business Administration in Karvina
Course Enrolment Limitations
The course is offered to students of any study field.
Course objectives (in Czech)
This course will require prior finance knowledge and advanced mathematics skills. The finance concepts that a student should have some knowledge of are, time value of money and bond and stock valuation. The math skills needed are the ability to take first and second derivatives.
Syllabus (in Czech)
  • Struktura výkladu:
    1. Review of time value of money, option basics and calculus, Chapters 1 and 2 in Chance: 1: Introduction, 2: The Structure of Options Markets.
    2. Chapter 3 in Chance: Principles of Option Pricing.
    3. Chapter 5 in Chance: Basic Option Strategies.
    4. Chapter 7 in Sercu and Uppal: Pricing Currency Options Using the Binomial Model. Demonstration of Option Tutor computer program.
    5. Chapter 4 in Chance
    6. Chapter 8 in Sercu and Uppal: Pricing European Options: The Lognormal Model.
    7. Chapter 8 in Sercu and Uppal: Pricing European Options: The Lognormal Model.
    8. Chapter 25 in Sercu and Uppal: International Capital Budgeting Using Option Pricing Theory.
    9. Chapter 7 in Chance: The Structure of Forward and Futures Markets
    10. Chapter 9 in Chance: Principles of Forward and Futures Pricing
    11. Chapter 14 in Sercu and Uppal: Risk and Return in the Forward Market (study the relationship between forward exchange rates and future spot exchange rate)
    12. Chapter 12 in Chance: Options on Futures.
    13. Chapter 13 in Chance: Foreign Currency Derivatives. Chapter 14 in Chance: Swaps and other Interest Rate Agreements.
    Obsah kurzu:
    1. Use the Excel spreadsheet program to create a file that uses the Black-Sholes Option Pricing Model to find the value of a "Call" option, the implied volatility of the call option, the call's delta, gamma, rho, vega and theta. These ideas are discussed in Chapter 4 in Chance.
    2. Use the Excel spreadsheet program to estimate hedge ratios a futures contract. The teacher has a CD that contains historic futures data (spot rates can be obtained on the Internet). The idea is discussed in Chapter 5 in Sercu and Uppal textbook.
    3. Use the Excel spreadsheet program to estimate a regression test of the relationship between futures rates and future spot rates. The teacher has a CD that contains historic futures data (spot rates can be obtained on the Internet. The relationship between forward rate and future spot rate discussed in Chapter 14 in Sercu and Uppal.
    4. Use the Excel spreadsheet program to compare the theoretical forward rate for exchange rates to the actual exchange rate. Obtain data from various issues of the Financial Times. Have at least 30 observations and 4 different exchange rates. The forward valuation model is discussed in Chapters 2, 3 and 4 in Sercu and Uppal.
    5. Use the Excel spreadsheet program to create a file that uses the Black-Sholes Option Pricing Model to find the value of a "Put" option, the implied volatility of the call option, the call's delta, gamma, rho, vega and theta. These ideas are discussed in Chapter 4 in Chance.
    6. Review and critique the contents of the following article: "The Collapse of Metallgesellschaft: Unhedgedable Risks, Poor Hedging Strategy, or Just Bad Luck?," by Franklin R. Edwards and Michael S. Canter, The Journal of Futures Markets, Vol. 15, No. 3, 1995, pp. 211-264.
    7. Review and critique the contents of the following article and textbook chapter: "Playing it safe with currency options," Euromoney, December, 1995, pp. 104-106; and Chapter 25: Financial Engineering (pages 911-940), in Introduction to Investments, by Haim Levy, SouthWestern, 1996.
    8. Review and critique the contents of the following chapter: Chapter Two: The Payment System and Derivative Instruments in The Global Financial System: A Functional Perspective by Dwight B. Crane, Kenneth A. Froot, Scott P. Mason, Andre F. Perold, Robert C. Merton, Zvi Bodie, Erik R. Sirri, and Peter Tufano, Harvard Business School Press, Boston, Massachusetts, 1995.
    9. Review and critique the contents of the following article, "A Survey of Corporate Risk Management," The Economist, February 10, 1996.

Language of instruction
Czech
Further comments (probably available only in Czech)
The course can also be completed outside the examination period.
The course is also listed under the following terms Winter 1990, Summer 1991, Winter 1991, Summer 1992, Winter 1992, Summer 1993, Winter 1993, Summer 1994, Winter 1994, Summer 1995, Winter 1995, Summer 1996, Winter 1996, Summer 1997, Winter 1997, Summer 1998, Winter 1998, Summer 1999, Winter 1999, Summer 2000, Winter 2000, Summer 2001, Winter 2001, Summer 2002, Winter 2002, Summer 2003, Winter 2003, Summer 2004, Winter 2004, Summer 2005, Winter 2005, Summer 2006, Winter 2006, Winter 2007, Summer 2008.
  • Enrolment Statistics (Summer 2007, recent)
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