Course Catalog Description

The course examines the various types of derivative securities that exist, their uses in investment and risk management, the market in which they are traded, and the arbitrage models used to estimate their market values.

Course Pre-requisite

FIN 3010; FIN 3330; FIN 3630

Course Learning Objectives

Upon successful completion of this course, the student will possess a working knowledge of derivative securities valuation and use, as well as some case illustrations of how derivative securities were managed (or mismanaged) in a corporate strategy context. Students will be exposed to some of the fundamental risk management tools used by practicing investment professionals as they learn how to hedge and immunize exposure to stock market risk, commodity price risk, interest rate risk, and foreign exchange rate risk.

Required Material

1.   Required Text: Hull, Fundamentals of Futures and Options Markets, 9th  edition, ISBN: 978-0- 13- 408324-7, Prentice Hall.

2.   Recommended Text: Hull, Solutions Manual and Study Guide for above text, ISBN: 0- 13-408365- 2, Prentice Hall.

3.   Course notes, readings and assignments to be passed out in class and/or posted to class webpage.

Course Expectations

I expect all students to keep up with the reading, videos, and weekly quizzes as suggested by the order of topics within each module. What you take away from this course is very much a function of what you put into it. Your desire to put in the time and effort needed to understand the material is the primary driver of your success in the course.

Course Requirements and Grading

Quizzes:

The quizzes will assess student’s knowledge retention after completing readings and homework for that week.  Quizzes are generally multiple-choice-questions, fill-in-the-blanks, true-false or other short-answer type questions. All weekly quizzes are due by Sunday, 11:59pm (strict deadline; no extensions).  All quizzes, except for the last quiz, carry equal weight.   The last quiz carries double weight. All quizzes together count 20% of the overall grade.

Exams:

The three exams together count 66% of the overall grade, with each exam carrying 22% weight.  At the end, I will reduce the points for your lowest scoring exam to 14.67% points (1/3rd less weight) and increase the points for your highest scoring exam to 29.33% weight (1/3rd more weight). This will reduce the impact of the exam in which you do poorly and amplify the impact of the exam in which you perform the best

The three exams will cover the material since the previous exam. All the exams will be closed-book/closed- notes, and it will consist of numerical problems, conceptual questions, definitions, and problems, as the course material dictates.  The exam dates will be posted on Canvas.

Participation Points:

Students will be evaluated on participation in the discussion forums, attending classes, timely contributions to the class activities, surveys, polls, etc.

Project:

The team project will be completed in teams consisting of 4-5 students.  Each team turns in one report, and all team members receive equal credit.  The team report due date will be posted on canvas.

Attendance Policy / Penalties on Tardiness

This is an in-person course, with regular attendance and class participation as an essential component for the success in this course. The benefit you get from the class is heavily dependent on your preparation and participation in these activities.

To apply for excused absence, you should complete the Attendance Form (follow links posted on Canvas) for every class that you will be absent. So, if you are going to miss more than one class, you must complete the form multiple times. The form should be completed before the class in which you will be absent.  If circumstances so dictate that you were not able to submit it before the class, then you should the explain the special situation in the form.

Students will be evaluated for attendance (see participation points above). In addition, excessive absences (more than 25% of missed classes) prevent students from meeting course objectives, and they may be required to drop the course or be administratively dropped or withdrawn.

Late or Missed Submissions

In case of quizzes, answers to the weekly quizzes will be posted immediately after they are due. So, no extensions will be offered. Students should plan accordingly.

In case of missed exam for excused reasons, a makeup may be offered. Any considerations will only be made for unanticipated, documented and University-approved excuses. To apply for makeup, you should complete  the  Makeup  Request  Form  The  form  should  be  completed  before  the  missed  exam.     If circumstances so dictate that you were not able to submit it before the exam, then you should the explain the special situation in the form.

If a student asks for an exception more than once in a term, it may raise a suspicion and student may be required to have high onus of proof.

Homework

For each chapter, selected end-of-chapter questions from the book are assigned as homework problems (questions numbers are posted in Canvas). The homework will not be collected for grading; however, it will form the basis for the exams, and therefore is important for doing well in the course.  Solutions to the homework problems can be found in the Solutions Manual, the recommended text listed above.

Grading Scale

The letter grades will be based on the following percentage scale: A= 93- 100; A- = 90-92; B+ = 87-89; B = 83-86; B- = 80-82; C+ = 77-79; C=70-76; C- = 68-69; D = 60-67; F = 0-59.

Appeals

Students may appeal grading of an exam or other assignment by providing a written appeal that describes the nature of the disagreement.   Appeals by  (professionally written) emails are acceptable, but verbal appeals are not. All appeals must be turned in within 3 business days after the return of the assignment. I will conscientiously consider all qualified appeals and render a decision within a reasonable period. In all cases my objective will be fairness to both you and your classmates. Appeals of course grades must follow the Chaifetz School of Business grade appeal policy.

Miscellany

Students are responsible  for understanding the course policies and requirements as expressed in this syllabus, as well as those policies and requirements announced via e-mails, and on Canvas.

Course Outline

(refer to Canvas for detailed course outline)

Module-1: Options

Ch- 1: Introduction to Financial Derivatives

Ch-8: Mechanics of Options Markets

Ch-9: Properties of Stock Options

Ch- 10: Trading Strategies Involving Options

Exam- 1

Module-2: Valuation Models

Ch- 12 & 18: Binomial Trees

Ch- 13: Black-Scholes-Merton Model

Ch- 17: The Greek Letters

Exam-2

Module-3: Futures / Forwards and Swaps

Ch-2: Futures Markets

Ch-3: Hedging Strategies Using Futures

Ch-5: Determination of Forward and Futures Prices

Ch-7: Swaps

Exam-3

Others: Exotic Derivatives

Ch-22: Overview of Exotic Derivatives (is time permits)

Academic Integrity Syllabus Statement:

Academic integrity is honest, truthful and responsible conduct in all academic endeavors. The mission of Saint Louis University is “the pursuit of truth for the greater glory of God and for the service of

humanity.” Accordingly, all acts of falsehood demean and compromise the corporate endeavors of  teaching, research, healthcare, and community service through which SLU fulfills its mission. The    University strives to prepare students for lives of personal and professional integrity, and therefore regards all breaches of academic integrity as matters of serious concern.

The full University-level Academic Integrity Policy can be found on the Provost's Office website at: https://www.slu.edu/provost/policies/academic-and-course/academic-integrity-policy.pdf

Additionally, each SLU College, School, and Center has its own academic integrity policies.

Chaifetz School Academic Honesty Policy:

It is the policy of the Richard A. Chaifetz School of Business at Saint Louis University that the "Giving and receiving of unauthorized assistance on any graded exercise constitutes academic dishonesty and may    result in grade reductions and/or probation, suspension, or dismissal."

Disability Accommodations:

Students with a documented disability who wish to request academic accommodations must formally    register their disability with the University. Once successfully registered, students also must notify their course instructor that they wish to use their approved accommodations in the course.

Please contact the Center for Accessibility and Disability Resources (CADR) to schedule an appointment  to discuss accommodation requests and eligibility requirements. Most students on the St. Louis campus

will contact CADR, located in the Student Success Center and available by email at

accessibility_disability@slu.eduor by phone at314.977.3484. Once approved, information about a

student’s eligibility for academic accommodations will be shared with course instructors by email from CADR and within the instructor’s official course roster. Students who do not have a documented

disability but who think they may have one also are encouraged to contact to CADR. Confidentiality will be observed in all inquiries.

Title IX Syllabus Statement:

Saint Louis University and its faculty are committed to supporting our students and seeking an environment that is free of bias, discrimination, and harassment. If you have encountered any form of sexual harassment, including sexual assault, stalking, domestic or dating violence, we encourage you to  report this to the University. If you speak with a faculty member about an incident that involves a Title IX matter, that faculty member must notify SLU’s Title IX Coordinator that you shared an experience relating to Title IX. This is true even  if you ask the faculty  member  not to  disclose the  incident. The Title  IX  Coordinator will then  be available to assist you in understanding all of your options and in connecting you with all possible resources on and off campus.

Anna   Kratky   is   the    Title    IX    Coordinator   at   Saint    Louis    University    (DuBourg    Hall,   room   36; [email protected]; 314-977-3886).  If you wish to speak with a confidential source, you may contact the counselors at the University Counseling Center at 314-977-TALK or make an anonymous report through SLU’s Integrity Hotline by calling 1-877-525-5669 or online at http://www.lighthouse-services.com/slu.

To    view     SLU’s     policies,     and     for     resources,     please     visit    the     following     web     addresses: https://www.slu.edu/about/safety/sexual-assault-resources/index.php and https://www.slu.edu/general- counsel.

Wellness:

All students experience stressors and challenges at some point, and seeking support is beneficial. Such

challenges may be the result of academic concerns (such as those related to particular assignments or

content in a course), or they may be more personal in nature (such as concerns related to relationships,

mental health, loss, identities, alcohol or drugs, housing or food security, or finances, among other things). If you experience these or other difficulties, please consider seeking support from the resources available   to you.

•    For concerns related to this course, please contact me. I am invested in your success and will support your success in the ways I can.

•    Additionally, you have access to the many resources SLU provides in support of your personal wellness. You will find a list of available resources on the Well-being page of the SLU website.

If you or someone you know is experiencing a crisis: please consult the Crisis Support and Warning Signs on the University Counseling Center website.

Student Success Center:

The Student Success Center (SSC) supports students in reaching their goals in and out of the classroom.    Providing a variety of resources, the Student Success Center houses both the Center for Accessibility and Disability Resources (CADR) and Academic Support, which includes Tutoring, Supplemental Instruction,    University Writing Services, and Student Success Coaching. The Student Success Center is located in the   Busch Student Center, Suite 331, and students can make an appointment with any SSC resource via EAB  Navigate. To learn more about the Student Success Center and its resources, please visit our website:

https://www.slu.edu/life-at-slu/student-success-center/index.php.