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Derivatives – Theory & Applications

Course Code: FINC 4380
Faculty: Commerce & Business Administration
Department: Finance
Credits: 3.0
Semester: 15
Learning Format: Lecture, Seminar
Typically Offered: TBD. Contact Department Chair for more info.
course overview

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.

Course Content

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%
Assignments                      10-15%

Participation                       0-10%
Final Exam                         35%      
Total                                 100%

Note: students who do not achieve a grade of at least 50% on the combined exam components will fail the course.

Learning Outcomes

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.

course prerequisites

FINC 3350 or FINC 3390 or equivalent with a grade of “C” or better



curriculum guidelines

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.

course schedule and availability
course transferability

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.