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FINANCIAL DERIVATIVES
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Learning outcome (at course level) |
Learning and teaching strategies |
Assessment Strategies |
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On completion of this course, the students will be able to CO232 Acquire knowledge of how forward contracts, futures contracts, swaps and options work, how they are used and how they are priced. CO233 Analyze the payoff structure and strategies of derivative contracts (futures and forwards) for different underlying securities (e.g., stocks financial indices, foreign exchange, commodities). CO234 Construct and evaluate Option strategies for risk management purposes. CO235 Explore the benefits and use of currency and interest rate swaps. CO236 Perform trading in financial derivative instruments under its legal framework.
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Class lectures Seminars Tutorials Group discussions and Workshops Question preparation
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Class test, Semester end examinations, Quiz, Solving problems in tutorials, Assignments, Presentation, Individual and group projects |
• 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.
• Meaning of Forwards contract,
• Features of Forward contract
• Advantages disadvantages of forward contract,
• Difference between forward and spot contract,
• Working of Forward contract, and classification of forward.
• 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.
• 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.
• 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.
• 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
• Prafulla Kumar Swain, Financial Derivatives, Himalaya Publishing House.
• Bhole L.M., Financial Institutions and Markets, Tata Mc Graw Hill, New Delhi
• Pathak, Bharati V., Indian Financial System, Pearson Education, New Delhi.
• NCFM and NISM Modules.
• Williams, Michacls, Fundamentals of Option Markets, Mc Graw Hill, New Delhi
• Hull, John, Introduction to Futures, Option market, Prentice Hall of India, New Delhi
• Redhead, Keith, Financial Derivatives- An Introduction to futures, forwards, option and swaps, Prentice Hall of India, New Delhi
E- RESOURCES
• Jayanth Varma, Derivatives And Risk Mgmt, Mc Graw Hill Edition.
• Sundaram, Rangarajan ,Derivatives, McGraw Hill Education,https://www.expresslibrary.mheducation.com/bookshelf
• National Digital Library
• https://nptel.ac.in/courses/110105071
• https://nptel.ac.in/courses/110107128
• Capitaline
• https://www.nseindia.com/
• https://www.moneycontrol.com/
JOURNALS
• 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
