This course will examine topics dealing with derivative securities and specialized financial products. The types of derivative securities and specialized financial products, their use in modern finance as tools for hedging, arbitrage and speculation, and methods for pricing them will be the main subject matter for this course.
1. Mechanics of futures and forward markets
2. Determination of forward and futures prices
3. Interest rate futures
4. Hedging strategies using futures
5. Swaps and Pricing
6. Mechanics of options markets
7. Credit derivatives, securitization and the credit crisis of 2007
8. Properties of stock options
9. Trading strategies involving options
10. Option pricing: binomial trees
11. Option pricing: Black-Scholes-Merton model
12. Options on stock indices, interest rate and currencies
13. Value at risk, volatility and risk management
14. Derivatives mishaps and lessons learned
Methods of Instruction
Lectures and seminar discussion
Means of Assessment
Midterm exam 30%
Case & Project 15-25%
Final Exam 35%
Note: students who do not achieve a grade of at least 50% on the combined exam components will fail the course.
At the end of the course, the successful student should be able to:
1. understand different types of derivative securities and specialized financial products, and derivative markets;
2. examine and utilize derivative securities as tools for hedging, arbitrage, speculation and risk management;
3. determine the value of different derivative securities; and
4. analyze the impact of derivative securities on financial markets and lessons learned from derivatives mishaps.
FINC 3350 or FINC 3390 or equivalent with a grade of “C” or better
Course Guidelines for previous years are viewable by selecting the version desired. If you took this course and do not see a listing for the starting semester/year of the course, consider the previous version as the applicable version.
Below shows how this course and its credits transfer within the BC transfer system.
A course is considered university-transferable (UT) if it transfers to at least one of the five research universities in British Columbia: University of British Columbia; University of British Columbia-Okanagan; Simon Fraser University; University of Victoria; and the University of Northern British Columbia.
For more information on transfer visit the BC Transfer Guide and BCCAT websites.
If your course prerequisites indicate that you need an assessment, please see our Assessment page for more information.