Derivative Securities and Corporate Risk Management

  • 16-weeks
  • 3 credits
  • Prerequisite: F303 and F305 with grades of C- or better

Advanced treatment of options, futures, and other derivative securities. Detailed description of the entire spectrum of derivative products. Theoretical and numerical valuation of derivative securities. How corporate risk managers use derivatives to hedge exchange rate risk, interest rate risk, commodity risk, credit risk, etc.

Learning Objectives:
I. Overview    
   A. Instruments        
       1. Futures/Forwards/Swaps        
       2. Options    
   B. Markets
II. Forwards/Futures    
   A. Valuation    
   B. Risk management        
       1. Equity markets        
       2. Fixed-income (interest rate) instruments        
       3. Currencies        
       4. Commodities    
   C. Speculation, Arbitrage, and Spreading
III. Options    
   A. Pricing        
        1. Theoretical        
        2. Numerical valuation, such as binomial or simulation    
    B. Risk management techniques with options    
    C. Option trading strategies (speculative)        
        1. Directional        
        2. Volatility plays    
    D. "Exotic" options
IV. Financial Engineering  

Typical Text:  An Introduction to Options and Futures, Chance                         
                    Introduction to Futures and Options Markets, Hull                         
                    Futures and Option Contracting: Theory and Practice, Marshall                         
                    @RISK software

Kelley School of Business

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