Contents |
Course Title
Financial Derivatives
Course Code
IAM 520
Credit
3(3-0)
Prerequisites
The students who have completed IAM 521 with a minimum semester grade of DD are allowed to register for this course:
Aims
This course is designed to provide a solid foundation in the principles of derivatives. It attempts to strike a balance between institutional details, theoretical foundations, and practical applications. Parallel to the already increasing attempts to integrate derivative securities and markets into the Turkish financial system, it is believed that this course will fill a gap in that students will be exposed to a rather comprehensive coverage of theory and application in the derivatives area. This course is expected to give the students a “competitive advantage” when they enter the job market since “derivatives” is a “hot topic” nowadays and BA4825/5825/IAM520 is one of the very few courses offered on this topic in Turkey!
Outline
- 1st Week: Introduction, The Structure of Options Markets
- 2nd Week: Principles of Option Pricing
- 3th Week: Option Pricing Models: The Binomial Model
- 4th Week: Option Pricing Models: The Black-Scholes Model
- 5th Week: Basic Option Strategies
- 6th Week: Advanced Option Strategies
- 7th Week: The Structure of Forward and Futures Markets
- 8th -9th Week: Principles of Forward and Futures Pricing
- 10th Week: Futures Hedging Strategies
- 11th Week: Advanced Futures Strategies
- 12th Week: Options on Futures
- 13th Week: Foreign Currency Derivatives
- 14th Week: Interest Rate Derivatives
Suggested Textbooks
- Chance, D.M. An Introduction to Derivatives and Risk Management, 6th Edition, Harcourt College Publishers, USA, 2004.
This book is available for sale at the METU Bookstore for the price of YTL45. The 5th Edition of the book is also available for checkout at the Reserve Desk of METU Muhan Soysal Library located at FEAS Building B, G Wing, Floor 2 (Call number: HG6024 A3 C48 2001).
Resources
You will need a lot of practice to feel comfortable with solving problems on options, futures and other derivatives. The METU Library carries a variety of books written on derivatives. It is a very good idea to check out some of these books and exercise your brain muscle by solving the end-of-chapter problems that are provided in these books.
OTHER NOTES
EXAMS
There will be two midterms and a final. The exam schedule is as follows:
- 1st Midterm: Thursday, March 27, 2008, 17:45 – 20:00
- 2nd Midterm: Thursday, May 1, 2008, 17:45 – 20:00
- Final Exam: Wednesday, May 21, 2008, 17:45 – 20:15
GRADING
Your total score in the course will be determined by the following weights:
- Written Assignments ========================== 10%
- Quizzes ====================================== 5%
- Midterm 1 ==================================== 25%
- Midterm 2 ==================================== 25%
- Final ======================================== 35%
No “extra” work above the aforementioned will be accepted or credited.
Makeup Examinations
There will be no make-ups for exams or homework assignments. You may be allowed to miss an exam under the most extreme circumstances and only after stringent verification and approval by the Department. If you do miss Exams 1 or 2, the weight of the exam will be added on top of your final exam weight. For example, if you miss Exams 1 or 2, the weight of 25 percent will be added on top of the weight of your final so that your Final Exam score will have the weight of 60 percent. This makeup policy is not negotiable.
RECITATION HOUR
There is going to be a weekly recitation hour. Teaching assistants from the department are going to work on sample problems on the topics that are covered during class from the previous weeks. These sample problems are made available at the course web page one day before the recitation hour so that you can take a look at them and may be even attempt to solve them before coming to class. Attendance to the recitation hour is not mandatory but highly recommended.
PRESENTATION SLIDES
A copy of the presentation slides is available at the course web page. These slides can be used as chapter summaries and utilized while taking down notes during class. • Smoking and usage of beepers or cellular phones are not allowed during the class. • Please arrive on time and do not enter the classroom after we already have entered. If you have to leave early, please inform us in advance. • The homework assignments are due at the beginning of the class period. Please note that no late assignments (no matter how late) will be accepted once the class starts. • You are encouraged to drop by our office during office hours for questions, concerns, or, suggestions. Outside the office hours, please make an appointment with us in advance, before or after the class, via phone or e-mail.