- Class Number 2934
- Term Code 2930
- Class Info
- Unit Value 6 units
- Mode of Delivery In Person
- Qiuyang Chen
- Qiuyang Chen
- Class Dates
- Class Start Date 25/02/2019
- Class End Date 31/05/2019
- Census Date 31/03/2019
- Last Date to Enrol 04/03/2019
This unit is designed to further students’ understanding of futures and options contracts and their use in managing risk. It builds upon material covered in FINM1001/FINM7006 (Foundations of Finance) and STAT7055 (Financial Statistics). FINM7041 provides an overview of options, futures, forwards and swaps on a range of underlying assets/commodities including stocks, interest rates, foreign exchange as well as more exotic instruments. The models used for pricing these instruments will be examined as well as techniques used for risk management.
Upon successful completion, students will have the knowledge and skills to:
- Explain in detail how options, futures, forwards, and swaps can be used on a range of underlying assets/commodities;
- Understand and be able to demonstrate the appropriate use of option trading strategies;
- Demonstrate how we use derivatives for a range of assets/commodities including stocks, interest rates, foreign exchange as well as exotic instruments and weather and electricity derivatives;
- Explain in detail and be able to demonstrate various models to price forward, futures, swap and option contracts; and,
- Use these pricing models for risk management.
Students undertaking this course will be taught fundamental skills in Finance that will be applied to many real life applications. Students will also be shown how these techniques are applied to research today.
Additional Course Costs
The only additional course costs are a non-programmable scientific calculator (not a financial calculator!)
Examination Material or equipment
The only permitted materials in the examination are a calculator (scientific, non-programmable and not a financial calculator), dictionary (which will be checked at the examination), pen and ruler.
Hull, J., Treepongkaruna, S., Heaney, R., Pitt, D., and D. Colwell, Fundamentals of futures and options markets, 1st adaption, Pearson Education 2014. (i.e., The textbook readings are optional for this course. In addition, this textbook is available to students as a 2 hour or 2 day loan from ANU library).
Students are required to read pages 125-153 of the CFA Standards of Practice Handbook, Standard IV: Duties to Employers. This content will be discussed in Lecture 1. This document can be found at:
Students will be given feedback in the following forms in this course:
· in tutorials through interactions with tutors and discussions with other students;
· through assessments where tutors will provide specific feedback;
· through consulting teaching staff during their consultation time.
ANU is committed to the demonstration of educational excellence and regularly seeks feedback from students. Students are encouraged to offer feedback directly to their Course Convener or through their College and Course representatives (if applicable). The feedback given in these surveys is anonymous and provides the Colleges, University Education Committee and Academic Board with opportunities to recognise excellent teaching, and opportunities for improvement. The Surveys and Evaluation website provides more information on student surveys at ANU and reports on the feedback provided on ANU courses.
Your final mark for the course will be based on the raw marks allocated for each of your assessment items. However, your final mark may not be the same number as produced by that formula, as marks may be scaled. Any scaling applied will preserve the rank order of raw marks (i.e. if your raw mark exceeds that of another student, then your scaled mark will exceed or be the same as the scaled mark of that student), and may be either up or down
Support for Students
The University offers a number of support services for students. Information on these is available online from http://students.anu.edu.au/studentlife/
If necessary, the lecturers and tutors for this course will contact students on their official ANU student email address. Information about your enrolment and fees from the Registrar and Student Services' office will also be sent to this email address. Students are expected to check the Wattle site for announcements about this course, e.g. changes to timetables or notifications of cancellations. Notifications of emergency cancellations of lectures or tutorials will be posted on the door of the relevant room.
Lecture: Tuesday, 14:00 – 16:00, Location: Copland T
Workshop: Friday, 12:00 –13:00, Location: Copland T
|Week/Session||Summary of Activities||Assessment|
|1||Topic: Course Overview and Extended Analysis of Forwards, Futures and Options Contracts Readings: Lecture Notes 1, Hull et al Ch. 1 & 2|
|2||Topic: Hedging Strategies Using Futures Readings: Lecture Notes 2, Hull et al Ch. 3 & 5||Tutorial 1 Questions|
|3||Topic: Interest Rate Contracts and Swaps Readings: Lecture Notes 3, Hull et al Ch. 4 & 7||Tutorial 2 Questions Quiz 1|
|4||Topic: Options and Options Trading Strategies Readings: Lecture Notes 4, Hull et al Ch. 9, 10 & 11||Tutorial 3 Questions Quiz 2|
|5||Topic: Binomial Model for Pricing Options Readings: Lecture Notes 5, Hull et al Ch. 12||Tutorial 4 Questions|
|6||Topic: Black-Scholes Model for Pricing Options Readings: Lecture Notes 6, Hull et al Ch. 13||Tutorial 5 Questions|
|7||Topic: Index and Foreign Exchange Options Readings: Lecture Notes 7, Hull et al Ch. 15||Tutorial 6 Questions|
|8||Topic: Options on Futures Contracts Readings: Lecture Notes 8, Hull et al Ch. 16||Tutorial 7 Questions Quiz 3|
|9||Topic: The Greek Letters Readings: Lecture Notes 9, Hull et al Ch. 17||Tutorial 8 Questions Quiz 4|
|10||Topic: Exotic Options and other Non-standard Products Readings: Lecture Notes 10, Hull et al Ch. 22||Tutorial 9 Questions Quiz 5|
|11||Topic: Credit, Weather, Energy and Insurance Derivatives and Derivatives Mishaps and Ethics in Risk Management Readings: Lecture Notes 11, Hull et al Ch. 23, 24 & 25 CFA Standards of Practice Handbook, Standard IV: Duties to Employers. pgs. 105-126||Tutorial 10 Questions Quiz 6|
|12||Topic: Review Readings: Lecture Notes 12||Tutorial 11 Questions|
Tutorial signup for this course will be done via the Wattle website. Detailed information about signup times will be provided on Wattle or during your first lecture. When tutorials are available for enrolment, follow these steps:
1. Log on to Wattle, and go to the course site
2. Click on the link “Tutorial enrolment”
3. On the right of the screen, click on the tab “Become Member of…..” for the tutorial class you wish to enter
4. Confirm your choice
If you need to change your enrolment, you will be able to do so by clicking on the tab “Leave group….” and then re-enrol in another group. You will not be able to enrol in groups that have reached their maximum number. Please note that enrolment in ISIS must be finalised for you to have access to Wattle.
|Assessment task||Value||Due Date||Return of assessment||Learning Outcomes|
|In-Tutorial Quizzes||15 %||11/03/2019||22/03/2019||1-5|
|Mid-Semester Exam||25 %||29/03/2019||23/04/2019||1,2|
|Final Examination||60 %||06/06/2019||04/07/2019||1-5|
* If the Due Date and Return of Assessment date are blank, see the Assessment Tab for specific Assessment Task details
ANU has educational policies, procedures and guidelines, which are designed to ensure that staff and students are aware of the University’s academic standards, and implement them. Students are expected to have read the Academic Misconduct Rule before the commencement of their course. Other key policies and guidelines include:
The ANU is using Turnitin to enhance student citation and referencing techniques, and to assess assignment submissions as a component of the University's approach to managing Academic Integrity. For additional information regarding Turnitin please visit the ANU Online website. Students may choose not to submit assessment items through Turnitin. In this instance you will be required to submit, alongside the assessment item itself, hard copies of all references included in the assessment item.
Moderation of Assessment
Marks that are allocated during Semester are to be considered provisional until formalised by the College examiners meeting at the end of each Semester. If appropriate, some moderation of marks might be applied prior to final results being released.
Assessment Task 1
Learning Outcomes: 1-5
• 6 quizzes will be held within tutorials on the weeks specified in this outline.
• The quizzes will be 10 – 15 minutes in duration, at the end of the tutorial.
• Students are required to prepare worked solutions to tutorial questions, bring these solutions to tutorials, and be prepared to participate in tutorial discussions
• Students will be required to sit 6 in-tutorial quizzes throughout the semester.
• Students MUST sit the quiz in the tutorial they are enrolled in; otherwise the quiz will not count.
• These quizzes will be run according to the schedule specified in this outline (unless otherwise stated by the lecturer).
• The content for the quizzes will be limited to the required material for the tutorial in which it’s held.
• Students’ best 5 marks will count towards 15% of their overall course grade.
• Students should receive their quizzes back one week after the quiz is held.
Assessment Task 2
Learning Outcomes: 1,2
• This exam is optional and redeemable for students.
• It is a closed book exam, with no formula sheet provided.
• The questions will be a mixture of theory and practical questions.
• Students will need to review and revise all material covered in lectures 1 to 4, inclusive, and corresponding tutorials.
• The exam will be held in week 5, this is scheduled by ANU Examinations.
• More details regarding the exam will be provided as the exam approaches.
Assessment Task 3
Learning Outcomes: 1-5
The final examination will be based on all the work covered throughout the duration of the semester. The final examination is worth 60% of the overall course grade. The exam will include a mixture of theoretical and numerical questions. Students will be provided with further details regarding the exam as it approaches.
Academic integrity is a core part of our culture as a community of scholars. At its heart, academic integrity is about behaving ethically. This means that all members of the community commit to honest and responsible scholarly practice and to upholding these values with respect and fairness. The Australian National University commits to embedding the values of academic integrity in our teaching and learning. We ensure that all members of our community understand how to engage in academic work in ways that are consistent with, and actively support academic integrity. The ANU expects staff and students to uphold high standards of academic integrity and act ethically and honestly, to ensure the quality and value of the qualification that you will graduate with. The University has policies and procedures in place to promote academic integrity and manage academic misconduct. Visit the following Academic honesty & plagiarism website for more information about academic integrity and what the ANU considers academic misconduct. The ANU offers a number of services to assist students with their assignments, examinations, and other learning activities. The Academic Skills and Learning Centre offers a number of workshops and seminars that you may find useful for your studies.
Accepted academic practice for referencing sources that you use in presentations can be found via the links on the Wattle site, under the file named “ANU and College Policies, Program Information, Student Support Services and Assessment”. Alternatively, you can seek help through the Students Learning Development website.
Extensions and Penalties
Extensions and late submission of assessment pieces are covered by the Student Assessment (Coursework) Policy and Procedure. The Course Convener may grant extensions for assessment pieces that are not examinations or take-home examinations. If you need an extension, you must request an extension in writing on or before the due date. If you have documented and appropriate medical evidence that demonstrates you were not able to request an extension on or before the due date, you may be able to request it after the due date.
Resubmission of Assignments
Distribution of grades policy
Academic Quality Assurance Committee monitors the performance of students, including attrition, further study and employment rates and grade distribution, and College reports on quality assurance processes for assessment activities, including alignment with national and international disciplinary and interdisciplinary standards, as well as qualification type learning outcomes.
Since first semester 1994, ANU uses a grading scale for all courses. This grading scale is used by all academic areas of the University.
Support for students
The University offers students support through several different services. You may contact the services listed below directly or seek advice from your Course Convener, Student Administrators, or your College and Course representatives (if applicable).
- ANU Health, safety & wellbeing for medical services, counselling, mental health and spiritual support
- ANU Diversity and inclusion for students with a disability or ongoing or chronic illness
- ANU Dean of Students for confidential, impartial advice and help to resolve problems between students and the academic or administrative areas of the University
- ANU Academic Skills and Learning Centre supports you make your own decisions about how you learn and manage your workload.
- ANU Counselling Centre promotes, supports and enhances mental health and wellbeing within the University student community.
- ANUSA supports and represents undergraduate and ANU College students
- PARSA supports and represents postgraduate and research students
Asset pricing and corporate finance