Derivative Securities

Course code ACFI3130Units 10Level 3000Faculty of Business and LawNewcastle Business School

Investment concerns financial decision-making about where to place wealth to provide for future returns. Students develop an understanding of binomial option pricing, the Black-Scholes option-pricing model, put-call parity for equity options and are introduced to currency options. The use of futures and options, payoff structures for options and arbitrage bounds will also be examined. Focus is given to options on futures. Students engage in independent or collaborative work processes developing communication experience reflective of professional practice.

Available in 2014

Callaghan CampusSemester 1
Previously offered in 2013, 2012, 2011, 2010, 2009, 2008, 2007, 2006, 2005, 2004
ObjectivesOn completion of this course, you should be able to:

1. Comprehend the nature and pricing of options contracts together with their uses in portfolio management and risk
reduction strategies
2. Demonstrate what a futures contract is, how futures markets are organised and the determinants of futures prices.
3. Interrelate the system of deposits, margins and marking-to-market used by futures exchanges
4. Interpret and explain speculation and hedging strategies using futures contracts, inclusive of reasons for
imperfection.
5. Define the features of the major financial contracts traded on the Sydney Futures Exchange and analyse the
speculation and hedging strategies using their futures contracts
6. Explain the uses of forward-rate agreements
7. Identify the major types and characteristics of options, distinguish between options and futures, and expound the
factors that affect option prices
8. Apply basic option pricing theorems, including put-call parity
9. Examine the Black-Scholes and binomial option pricing models and how they are used to calculate option prices
10. Explain the characteristics and uses of foreign currency options
11. Work individually or in teams to analyse and communicate investment information leading to independent investment
decision making.
12. Evaluate different financial paradigms and outcomes to inform and direct personal and professional learning.
ContentCovers analysis of derivative securities, binomial option pricing, put-call parity for stock options and the like.
Replacing Course(s)N/A
TransitionN/A
Industrial Experience0
Assumed KnowledgeACFI2080, EBUS2000, STAT1060 or ECON1130.
Modes of DeliveryInternal Mode
Teaching MethodsLecture
Tutorial
Assessment Items
Essays / Written Assignments
Examination: Formal
Quiz - Classmid-semester quiz
Contact HoursLecture: for 2 hour(s) per Week for Full Term
Tutorial: for 1 hour(s) per Week for 13 weeks
Timetables2014 Course Timetables for ACFI3130