FINANCIAL DERIVATIVES

Paper Code: 
CBFS 601
Credits: 
4
Contact Hours: 
60.00
Max. Marks: 
100.00
Objective: 

The course will enable the students to evaluate derivative instruments and pricing models to design hedging strategies, assess market trends, and address regulatory and ethical considerations in financial risk management

Course Outcomes: 

 

 

Course

 

 

Learning outcome (at course level)

Learning  and Teaching Strategies

Assessment Strategies

Course Code

 

 

Course Title

 

 

 

 

 

 

 

 

 

 

 

CBFS601

24BFS 10124101

Financial Derivatives  (Theory)

 

  1. Acquire knowledge about the working of forward contracts, futures contracts, swaps, and options, their uses, and pricing.
  2. Analyze the payoff and strategies of derivative contracts for different underlying securities such as stocks, financial indices, foreign exchange, commodities.
  3. Construct and evaluate Option strategies for risk management purposes.
  4. Explore the benefits and use of currency and interest rate swaps.
  5. Performs trading in financial derivative instruments under its legal framework.
  6. Contribute effectively to course-specific interaction

 

Approach in teaching: Blended Learning, Collaborative approach, Interactive Lectures, Discussion, Group Projects, PowerPoint presentation.

   

 

 

Learning activities for the students:

Self-learning assignments, Seminar presentations, Case Study Analysis, Brainstorming activities

 

Class tests, CA Test,

Semester end examinations, Quiz,

Evaluation of student Presentations,

 

Evaluation of Individual and group projects,

 

Assessment of Project Reports and viva voce.

 

12.00

Basics of Derivatives (12Hours)
• Evolution of derivatives market,
• Indian derivatives Market,
• Types of derivatives markets,
• Significance of derivatives,
• Market participants and their roles in the derivatives markets,
• OTC and Exchange Traded Market.

12.00
Unit II: 
Principles of microfinance

5. Meaning of Forwards contract,
6. Features of Forward contract
7. Advantages and disadvantages of forward contract,
8. Difference between forward and spot contract,
9. Working of Forward contract, and classification of forward.
10. Pricing of Forward Contracts- Cash and Carry Model- Basis, Contango, Backwardation, Convergence
Introduction to Future Contract
• Meaning,
• features of Future contract,
• Advantages and disadvantages,
• Comparison between forward and future contract.
• Strategies for hedging, speculation and arbitrage in futures market.
• Pricing of Future contracts-Cash and Carry Model for Futures Pricing- Cash and Carry Model- Basis, Contango, Backwardation, Convergence, Price of an asset that pays no Dividend
• Future market operational guidelines.

12.00

Introduction to Options-
• Concept, features, Margin, Open Interest
• Types of options,
• Distinction between options and futures
• Option Trading Strategies- Option spreads,
• Straddle,
• Strangle,
• Covered Call,
• Protective Put, Butterfly spread

12.00

• Meaning, features,
• Advantages and disadvantages of swaps,
• Types of swaps.
• Currency Swaps- definition, features, and uses.
• Interest rate swaps- definition, features and Types.
• Economic motive for Swaps

12.00

Trading, clearing, and settlement System of derivative market Legal and Regulatory Environment
• Trading Clearing and Settlement mechanism
• Securities Contract (Regulation) Act, 1956,
• Securities and Exchange Board of India Act, 1992,
• Important rules and regulations in derivatives trading,
• Regulation in clearing & settlement and risk management

Essential Readings: 

1. Prafulla Kumar Swain, Financial Derivatives, Himalaya Publishing House.
2. Bhole L.M., Financial Institutions and Markets, Tata Mc Graw Hill, New Delhi
3. Pathak, Bharati V., Indian Financial System, Pearson Education, New Delhi.
4. NCFM and NISM Modules

References: 

1. Williams, Michacls, Fundamentals of Option Markets, Mc Graw Hill, New Delhi
2. Hull, John, Introduction to Futures, Option market, Prentice Hall of India, New Delhi
3. Redhead, Keith, Financial Derivatives- An Introduction to futures, forwards, option and swaps, Prentice Hall of India, New Delhi

e- Resources
• https://www.moneycontrol.com/
• International Journal of Financial Management, http://publishingindia.com
• The Journal of Finance, https://onlinelibrary.wiley.com/journal/15406261
• International Journal of Finance and Economics, https://onlinelibrary.wiley.com/journal/10991158
Directory OF Open Access Journals (OA)
ProQuest
• Jayanth Varma, Derivatives And Risk Mgmt, Mc Graw Hill Edition.
o Sundaram, Rangarajan,Derivatives, McGraw Hill Education, https://www.expresslibrary.mheducation.com/bookshelf
o National Digital Library
o https://nptel.ac.in/courses/110105071
o https://nptel.ac.in/courses/110107128
o Capitaline https://www.nseindia.com/

Academic Year: 
2023-2024
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