30426 - Options, Futures and other Derivatives

Academic Year 2022/2023

  • Moduli: Giuseppe Lusignani (Modulo 1) Riccardo Tedeschi (Modulo 2)
  • Teaching Mode: Traditional lectures (Modulo 1) Traditional lectures (Modulo 2)
  • Campus: Bologna
  • Corso: Second cycle degree programme (LM) in Economics and Economic Policy (cod. 8420)

Learning outcomes

The course provides the necessary tools to understand the financial investment choices of individual and institutional investors. At the end of the course students are expected to know theoretically and practically how to assess the performance and risks of the main financial instruments traded on financial markets, to know how to combine the individual securities in a portfolio; to know the evaluation criteria of the main financial instruments (bonds, equities and derivatives), the principles of modern portfolio theory and the main combination strategies of financial portfolios.

Course contents

Module 1

  • Introduction to financial derivatives;
  • Operating mechanisms of future markets and hedging strategy;
  • Interest Rates, Forward Rates, Future Prices, Interest Rates Futures
  • Interest Rate Swap Contracts
  • How the options market works, basic properties of options;
  • Options Pricing: binomial trees and risk-neutral evaluating;
  • The Black-Scholes-Merton Model;
  • OptionsOptions on stock indices and currencies

Module 2

  • Introduction to Credit Risk: Single Name and Portfolio
  • Assessment of Defaultable Bonds
  • Assessment of Credit Default Swaps.
 The second module is taught by Dr. Riccardo Tedeschi.

Readings/Bibliography

Hull, J.C. - Options futures and other derivatives (10th edition), Pearson, 2018

Further bibliographical references will be provided during the course. The teaching material will be made available on the platform https://virtuale.unibo.it

 

Teaching methods

Lectures followed by in-class tutorials.

 

Assessment methods

The exam consists of a written test, where the student will be asked to show the ability to apply, both analytically and numerically, what it has been covered during the lectures.

In detail, the written exam covers the topics of the two modules and is divided into two parts of 55 minutes each: the first consists of 18 multiple-choice questions (mix of theoretical questions and simple exercises) and a second of two more complex exercises (problems) also articulated in multiple-choice mode.

To each correct answer of the 18 questions will be assigned 1 point (+1); to each wrong answer a reduction of 0.25 points (-0.25) and in case of no answer, 0 points.

The correct answers of the two exercises, also in the form of multiple choice, will be assigned a score differentiated according to the difficulty, for a total of 9 points for each exercise (18 points on the two exercises). The indication of this score will be made explicit in the text of each exercise. Also in this case, a reduction of 0.25 points (-0.25) will be applied to each wrong answer, and in the case of no answer, 0 points.

The final grade, in thirtieths, is obtained dividing the total score achieved (first and second part) by the value of 32 (rounded).

The final grade of the OFAD exam will contribute 50% to the final grade of the integrated course in Economics and Technique of Financial Markets (EPELM students).

 

Teaching tools

Frontal lessons with projector support; applications developed in excel and visual basic for the evaluation of derivative contracts discussed during the lessons.

Office hours

See the website of Giuseppe Lusignani

See the website of Riccardo Tedeschi