EXC 2707 Risk Management with Derivatives - RE-SIT EXAMINATION


EXC 2707 Risk Management with Derivatives - RE-SIT EXAMINATION

Responsible for the course
Barbara Bukhvalova

Department of Financial Economics

According to study plan

ECTS Credits

Language of instruction

Due to the growing popularity of both financial derivative instruments, as well as broadening understanding of the importance of real options in general business applications, a basic understanding of the intuition of derivative markets is essential not only to students and specialists in finance, but also to general business practitioners.

To familiarize students with the intuition of valuation of financial instruments whose value is determined by the valuation of some other market-traded assets. Sharing in this characteristic, options and futures are referred to as derivative assets. The introduction to option and futures markets aims to provide intuition needed to understand the arbitrage free valuation of contingent claims. Intuition of the importance of financial derivatives valuation is then extended to show the importance of real options in general business practices.

EXC 2300 Basic Financial Management, EXC 2501 Financial Decision Making, and EXC 2505 Empirical Methods in Finance, or equivalent

Compulsory reading
McDonald, Robert L.. 2006. Derivatives markets. 2nd. ed. Boston, Mass.: Addison Wesley

Recommended reading
Hull, John C.. 2008. Fundamentals of futures and options markets. 6th. ed. Upper Saddle River, N.J.: Pearson/Prentice Hall

Course outline
  1. Introduction, Basics of Stock Option Pricing
  2. Basic Option Strategies, Combinations and Spreads
  3. Option Pricing: Black-Scholes Option Pricing Model
  4. The Option Greeks
  5. The Futures Market
  6. Stock Index Futures
  7. Foreign Exchange Futures
  8. Real Options

Computer-based tools

Course structure
36 hours of classroom teaching (12 lectures) in addition to 6 hours of tutoring related to assigned exercise problems. Exercises highlighting and demonstrating often-used, practical applications managing risk with derivative instruments will be used extensively in class.

There will be mandatory home assignments. Specific Information regarding any aspect of student evaluation will be provided in class. It is the student's responsibility to obtain this information. Please note that whilst attendance is not compulsory, it is students' responsibility to obtain information provided in class that is not included on the course homepage/It's learning or in the textbook. Notice also that the course homepage and/or It's learning are not designed for the purpose of accommodating the needs of students choosing not to attend class.

A three hour individual multiple choice exam concludes the course.

Examination code(s)
EXC 27072 - Multiple choice exam, which accounts for 100% of the grade in EXC 2707 Risk Management with Derivatives, 6 ECTS credts.

Examination support materials
A BI-approved exam calculator (INSTRUMENTS BA II Plus™), interest rate tables and a bilingual dictionary.
Examination support materials at written examinations are specified under exam information in our web-based Student handbook. Please note the use of calculator and dictionary, http://www.bi.edu/studenthandbook/examaids

Re-sit examination
Due to changes in our Bachelor Programmes from the autumn semester of 2009, there also will be changes in every single course. This course was taught for the last time in the spring semester of 2011. A re-sit exam will be offered every term including the spring term of 2013.

Additional information