Financial Derivatives

Syllabus

Course Code: BA4004

Financial Derivatives

Unit I: Introduction                                                                                                                    10 Hours

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                                                                                                          10 Hours

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                                                                                                                         10 Hours

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                                                                                                                           10 Hours

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 India                                                                                                           10 Hours

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.