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 FINM7006 and STAT7055. 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.

Learning Outcomes

Upon successful completion, students will have the knowledge and skills to:

1. Explain in detail how options, futures, forwards, and swaps can be used on a range of underlying assets/commodities;
2. Demonstrate the appropriate use of option trading strategies;
3. Demonstrate the use of derivatives for a range of assets/commodities including stocks, interest rates, foreign exchange as well as exotic instruments and weather and electricity derivatives;
4. Explain in detail and be able to demonstrate various models to price forward, futures, swap and option contracts;
5. Use these pricing models for risk management; and,
6. Collect, process, interpret and communicate the outcomes of complex financial problems.

Research-Led Teaching

Some topics driven by the lecturer’s research experience. Sharing with students the latest research findings or methods in relevant research area.

Examination Material or equipment

A non-programmable scientific calculator is a necessity for every enrolled student in this course.

Required Resources

Textbook:

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). Further, an e-book version of this text is available at: https://library.anu.edu.au/record=b6460173

Staff Feedback

Students will be given feedback in the following forms in this course:

• Written comments
• Verbal comments
• Feedback to the whole class, to groups, to individuals, focus groups

Student Feedback

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.

Class Schedule

Week/Session	Summary of Activities	Assessment
1	Introduction	No tutorial or workshop
2	Hedging using Futures
3	Interest Rate Contracts and Swaps
4	Options and Trading Strategies	Quiz 1
5	Valuing Options – Binominal Trees
6	Valuing Options – Black and Scholes	Quiz 2 No workshop
7	Index and Foreign Exchange Options
8	Options on Futures Contracts	Quiz 3
9	The Greeks Letters
10	Exotic Options and Other Non-standard Products	Quiz 4
11	Credit, Weather, Energy and Insurance Derivatives; Real Options in Project Evaluation
12	Review	No workshop

Tutorial Registration

Tutorials will be available on campus, live through scheduled Zoom sessions and as pre-recorded videos. Information regarding enrolments for these options will be provided on Wattle no later than week 1 of the semester.

Assessment Summary

Assessment task	Value	Due Date	Return of assessment	Learning Outcomes
Online Quizzes	40 %	15/03/2022	20/05/2022	1,2,3,4
Final Exam	60 %	02/06/2022	30/06/2021	1,2,3,4

* If the Due Date and Return of Assessment date are blank, see the Assessment Tab for specific Assessment Task details

Policies

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:

• Student Assessment (Coursework) Policy and Procedure
• Special Assessment Consideration Policy and General Information
• Student Surveys and Evaluations
• Deferred Examinations
• Student Complaint Resolution Policy and Procedure

Assessment Requirements

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.

Participation

Course content delivery will take the form of pre-recorded weekly lectures (available via echo360 on Wattle), on-campus weekly workshops (available via echo360 on Wattle) and weekly tutorials, delivered in hybrid format (on campus, live through scheduled Zoom sessions and as pre-recorded videos).

Examination(s)

Centrally scheduled examinations through Examinations, Graduations & Prizes will be timetabled prior to the examination period. Please check ANU Timetabling for further information.

Assessment Task 1

Online Quizzes

Weight: 40% in total

Duration: 20 minutes each

Time: Weeks 4, 6, 8, & 10

Submission: via Wattle

Below are the topics covered:

Quiz 1 on Lectures 1 – 3

Quiz 2 on Lectures 4 – 5 

Quiz 3 on Lectures 6 – 7

Quiz 4 on Lectures 8 – 9

Four online quizzes are counted towards the final grade and all quizzes are of equal value (10%). The quizzes are to be completed individually. Each quiz is 20mins and

this includes the time to upload your document. Each quiz will open at 2pm on Thursday of the relevant quiz week and it will close at 2.20pm. There is only one attempt allowed for each student. Each quiz contains one calculation question and you must show all workings. The marking criteria will be based on model solutions and answers prepared by the lecturer and will be made available to students via Wattle after the quiz week. No alternative arrangement will be made if a student misses a quiz. In cases where students apply for special considerations and have them approved before the quiz, the weighting of the quiz will be transferred to the final exam. 

Assessment Task 2

Final Exam

Weight: 60%

Duration: 3.5 hours

Time: Examination Period

Submission: via Wattle

The final exam will be a Wattle-based online exam and will be worth 60%. You will have 3.5 hours to complete the exam and it is to be completed individually. A mixture of

theoretical and practical (numerical) questions will be included. All topics covered in this course will be examined. It will be open book and all materials are permitted.

The exam will be centrally timetabled and more details about the exam will be provided in Week 10.

Academic Integrity

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.

Online Submission

All assessments are to be submitted online.

Hardcopy Submission

There are no hard-copy submission for this course.

Late Submission

No submission of assessment tasks without an extension after the due date will be permitted. If an assessment task is not submitted by the due date, a mark of 0 will be awarded.

Referencing Requirements

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.

Privacy Notice

The ANU has made a number of third party, online, databases available for students to use. Use of each online database is conditional on student end users first agreeing to the database licensor’s terms of service and/or privacy policy. Students should read these carefully. In some cases student end users will be required to register an account with the database licensor and submit personal information, including their: first name; last name; ANU email address; and other information. In cases where student end users are asked to submit ‘content’ to a database, such as an assignment or short answers, the database licensor may only use the student’s ‘content’ in accordance with the terms of service — including any (copyright) licence the student grants to the database licensor. Any personal information or content a student submits may be stored by the licensor, potentially offshore, and will be used to process the database service in accordance with the licensors terms of service and/or privacy policy. If any student chooses not to agree to the database licensor’s terms of service or privacy policy, the student will not be able to access and use the database. In these circumstances students should contact their lecturer to enquire about alternative arrangements that are available.

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