B2209 - Options, Futures and Derivatives

Learning outcomes

At the end of the course the student has a sound knowledge of the financial products traded in the market, the differences among them, and the reasons why they were introduced in the market. The products range from standard bonds and stocks, to derivatives and structured finance products. The student has knowledge of the main agents trading in the market, as fund raisers or investors, as well as financial intermediaries.

Course contents

Derivatives extend finance to an entirely new dimension. They allow risk and other important characteristics to be effectively separated from the financial instruments they are attached to, and to be managed independently. Modern risk management depends heavily on derivatives. At the same time, derviative prices depend on a number of risk factors.

We will outline the key practical aspects of structures of marketss, cash flows involved in the exchange of the financial instrucments, pricing tools, hedging approaches and arbitrage strategies related to:

a. contract derivatives: options and futures on financial assets, commodities, interest rates, foreign currency, indices or any other clearly defined variable of economic/financial relevance

b. structured products arising from the securitization of a pool of assets.

The emphasis in this course is not on the math and theory, but always on developing intuition. The goal is for to understand the principles of how these instruments and markets work - not to prove theorems and derive models.

Readings/Bibliography

The mandatory study materials are the following:

1. Texbook by Hull J., 2023, Options, Futures, and Other Derivatives, Pearson

2. Class notes, slides and additional reading materials shared by the professor on Virtuale during the lectures.

Teaching methods

Lectures, exercises, cases and reading with discussion in class.

Assessment methods

ALL the students (regardless of class attendance) will take a three-hour written exam with questions based on the material covered in the mandatory study materials.

The written exams will take place during the standard assessment sessions scheduled by the professor throughout the academic year.

Grading criteria

The answers provided by the students in the written exam will be assessed based on the following.

The ability of the student to achieve a coherent and comprehensive understanding of the topics addressed, to critically assess them and to use an appropriate language will be evaluated with the highest grades (A = 27-30 con lode).

A predominantly mnemonic acquisition of the study materials, coupled with evidence of gaps and deficiencies in terms of language, critical and/or logical skills will result in grades ranging from good (B = 24-26) to satisfactory (C = 21-23).

A low level of knowledge of the study materials together with gaps and deficiencies in terms of language, critical and/or logical skills will lead a student to ‘barely pass' the exam (D = 18-20) or to a fail grade (E).

Teaching tools

Slides, articles and chapters (depending on feedback from the classduring the course).

Office hours

See the website of Paolo Zagaglia