BA 4004

Financial Derivatives

HBS > Professional Electives > Financial Derivatives
Course ID
BA 4004
Level
Post Graduation
Semester
Semester III

OBJECTIVES:
• Understand the nuances involved in derivatives
• Understand the basic operational mechanisms in derivatives

UNIT I INTRODUCTION
Derivatives – Definition – Types – Forward Contracts – Futures Contracts – Options – Swaps – Differences between Cash and Future Markets – Types of Traders – OTC and Exchange Traded Securities – Types of Settlement – Uses and Advantages of Derivatives – Risks in Derivatives.

UNIT II FUTURES CONTRACT
Specifications of Futures Contract – Margin Requirements – Marking to Market – Hedging using Futures – Types of Futures Contracts – Securities, Stock Index Futures, Currencies and Commodities – Delivery Options – Relationship between Future Prices, Forward Prices and Spot Prices.

UNIT III OPTIONS
Definition – Exchange Traded Options, OTC Options – Specifications of Options – Call and Put Options – American and European Options – Intrinsic Value and Time Value of Options –Option payoff, options on Securities, Stock Indices, Currencies and Futures – Options pricing models – Differences between future and Option contracts.

UNIT IV SWAPS
Definition of SWAP – Interest Rate SWAP – Currency SWAP – Role of Financial Intermediary– Warehousing – Valuation of Interest rate SWAPs and Currency SWAPs Bonds and FRNs –Credit Risk.

UNIT V DERIVATIVES IN INDIA
Evolution of Derivatives Market in India – Regulations – framework – Exchange Trading in Derivatives – Commodity Futures – Contract Terminology and Specifications for Stock Options and Index Options in NSE – Contract Terminology and specifications for stock futures and Index futures in NSE – Contract Terminology and Specifications for Interest Rate Derivatives.

TOTAL: 45 PERIODS

OUTCOMES:
• Possess good skills in hedging risks using derivatives
•  Understand about future contract and options
•  Learning in depth about options and swaps
•  Knowing about the evolution of derivative markets
•  Develop in depth knowledge about stock options and index futures in NSE

REFERENCES :

1. John.C.Hull, Options, Futures and other Derivative Securities‟, PHI Learning, 9 th Edition, 2012
2. Keith Redhead, „Financial Derivatives – An Introduction to Futures, Forwards, Options and
SWAPs‟,– PHI Learning, 2011.
3. Stulz, Risk Management and Derivaties, Cengage Learning, 2nd Edition, 2011.
4. Varma, Derivaties and Risk Management, 2ndt Edition, 2011.
5. David Dubofsky – „Option and Financial Futures – Valuation and Uses, McGraw Hill International
Edition.
6. S.L.Gupta, Financial Derivaties- Theory, Concepts and Practice, Prentice Hall Of India, 2011.
Website of NSE, BSE.