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Viewing: ECG 528/FIM 528/MA 528/MBA 528 : Options and Derivatives Pricing

Last approved: Tue, 21 Jun 2016 08:01:09 GMT

Last edit: Mon, 20 Jun 2016 18:18:03 GMT

Catalog Pages referencing this course
Change Type
Major
ECG (Graduate Economics)
528
031041
Dual-Level Course
No
Cross-listed Course
Yes
Course Prefix:
MBA
FIM
MA
Options and Derivatives Pricing
Options & Derivatives Pricing
Poole College of Management
Economics (20EC)
Term Offering
Fall Only
Offered Every Year
Fall 2016
Previously taught as Special Topics?
No
 
Course Delivery
Face-to-Face (On Campus)

Grading Method
Graded/Audit
3
16
Contact Hours
(Per Week)
Component TypeContact Hours
Lecture3.0
Course Attribute(s)


If your course includes any of the following competencies, check all that apply.
University Competencies

Course Is Repeatable for Credit
No
 
 
Tao Pang
Associate Professor
Full

Open when course_delivery = campus OR course_delivery = blended OR course_delivery = flip
Enrollment ComponentPer SemesterPer SectionMultiple Sections?Comments
Lecture3030NoThese are our estimates
Open when course_delivery = distance OR course_delivery = online OR course_delivery = remote
Prerequisites: MA 341 and MA 405 and MA 421
Is the course required or an elective for a Curriculum?
No
The course covers (i) structure and operation of derivative markets, (ii) valuation of derivatives, (iii) hedging of derivatives, and (iv) applications of derivatives in areas of risk management and financial engineering. Models and pricing techniques include Black-Scholes model, binomial trees, Monte-Carlo simulation. Specific topics include simple no-arbitrage pricing relations for futures/forward contracts; put-call parity relationship; delta, gamma, and vega hedging; implied volatility and statistical properties; dynamic hedging strategies; interest-rate risk, pricing of fixed-income product; credit risk, pricing of defaultable securities.

Course name more accurately reflects content of course.


Prefix additions means faculty from more departments can offer the course.  Mathematics will offer the course in Fall 2016.  Course is required for Financial Math.


Updated course description more accurately reflects the content of the course.


Updated prerequisites more accurately reflects requirements of the course.


Learning outcomes added to this action have been used consistently since the course was offered.  They were not required in the original action creating the course.


No

Is this a GEP Course?
GEP Categories

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Requisites and Scheduling
 
a. If seats are restricted, describe the restrictions being applied.
 

 
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Additional Information
Complete the following 3 questions or attach a syllabus that includes this information. If a 400-level or dual level course, a syllabus is required.
 
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College(s)Contact NameStatement Summary
College of Sciences
Poole College of ManagementXiaoyong Zheng, DGP for ECG"My department heads are OK with cross listing. So please go ahead to initiate your proposal." (email dated 2/3/2016)
College of Agriculture and Life SciencesXiaoyong Zheng, DGP for ECG"My department heads are OK with cross listing. So please go ahead to initiate your proposal." (email dated 2/3/2016)
Poole College of ManagementSteve Allen"I just conferred electronically with Lee Craig and Richard Warr. We are all supportive of cross listing ECG 528 with your department. Please let me know what you need from me when you get to the formal course action." (email dated 11/19/2015)
This course has been taught previously as a Special Topics course as part of a faculty member’s regular teaching load so no additional resources are required

1. Objective: Students can calculate price and profit/loss for fixed income financial products


2. Objective: Students can calculate profit and loss for trading financial derivatives


3. Objective: Students can calculate the fair price of options, futures and other financial derivatives using the no-arbitrage principle.


Student Learning Outcomes

1.a. Outcome: Students will be able to calculate bond price from interest rate term structure curve and vice versa;


1.b. Outcome: Students will be able to calculate duration and convexity for a bond;


1.c. Outcome: Students will be able to calculate forward interest rate and the swap rate from the term structure curve.


2.a. Outcome: Students will be able to apply financial derivatives to hedge financial risk.


2.b. Outcome: Students will be able to calculate the profit and loss for the margin account while trading futures.


2.c. Outcome: Students will be able to calculate the profit and loss if the investor invests on derivatives instead of the underlying assets.


3.a. Outcome: Students will be able to apply the no-arbitrage principle and risk-neutral measure to derive prices for options, futures and other derivatives


3.b. Outcome: Students will be able to apply binomial tree model to derive and/or verify risk-neutral pricing formulas.


3.c. Outcome: Students will be able to derive the replication portfolio for derivatives such as forward and options.


Evaluation MethodWeighting/Points for EachDetails
Exam40in-class midterm is given about midway through the semester
Homework20homework is collected throughout the semester
Final Exam40in-class final is required and given at the time designated by R&R
TopicTime Devoted to Each TopicActivity
Introduction to Various Derivatives1/2 weekLectures & Homework
Present Value1/2 weekLectures & Homework
Forward and Futures Prices1 weekLectures & Homework
Hedging Using Futures1 weekLectures & Homework
Demand, Supply and Equilibrium1/2 weekLectures & Homework
Interest Rates1/2 weekLectures & Homework
Basics of Options, including Trading Strategies1 weekLectures & Homework
Risk Aversion1/2 weekLectures & Homework
Arbitrage Theorem1 weekLectures & Homework
Binomial Trees1 weekLectures & Homework
Elements of Asset Pricing1 weekLectures & Homework
Introduction to Black-Scholes1 weekLectures & Homework
Implied Volatility1 weekLectures & Homework
Greek Letters and Hedging1 weekLectures & Homework
Capital Asset Pricing Model and Portfolio Management1 weekLectures & Homework
Martingales and Measures1/2 weekLectures & Homework
Interest Rate Derivatives1/2 weekLectures & Homework
Real Options1/2 weekLectures & Homework
Midterm1/2 weekLectures & Homework
mlnosbis 2/17/2016: Workflow edited to include DGP's for Financial Math and Math and College of Science approvers, as requested by Jeff Scroggs.

mlnosbis 4/11/2016: Fully approved by MGMT, CALS, and COS. No further consultation required.

ghodge 4/11/2016 Ready for ABGS reviewers

ABGS Reviewer Comments:
-Does this still need 4 cross-listings?
-Should title have apostrophes (Options' and Derivatives') or not (Option and Derivative)?
Key: 6175