Students
AFIN329 – Derivative Instruments
2019 – S2 Day
General Information
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| Unit convenor and teaching staff |
Unit convenor and teaching staff
Unit Convenor
Ryle Perera
Contact via ryle.perera@mq.edu.au
E4A 229
Refer to iLearn
Administration
Kenneth Wong
Contact via Refer to iLearn
Refer to iLearn
Refer to iLearn
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| Credit points |
Credit points
3
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| Prerequisites |
Prerequisites
6cp at 200 level including (AFIN252 or AFIN270 or STAT272)
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| Corequisites |
Corequisites
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| Co-badged status |
Co-badged status
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| Unit description |
Unit description
This unit explores the characteristics and pricing of derivatives. The importance of the principles of hedging and arbitrage in derivative pricing, is considered. Derivatives investigated include forwards, futures, options and various structured products. In particular, the unit covers non-standard securities and numerical methods.
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Important Academic Dates
Information about important academic dates including deadlines for withdrawing from units are available at https://www.mq.edu.au/study/calendar-of-dates
Learning Outcomes
On successful completion of this unit, you will be able to:
- Understand the concepts of option pricing theory and the role of derivatives
- Apply financial derivatives such as forward/futures and options to solve quantitative problems
- Develop skills to price options and other derivatives.
- Examine the principles of hedging, arbitrage theory and structured products
General Assessment Information
It is the responsibility of students to view their marks for each within session assessment on iLearn within 20 working days of posting. If there are any discrepancies, students must contact the unit convenor immediately. Failure to do so will mean that queries received after the release of final results regarding assessment tasks (not including the final exam mark) will not be addressed.
Assessment criteria for all assessment tasks will be provided on the unit iLearn site.
Assessment Tasks
| Name | Weighting | Hurdle | Due |
|---|---|---|---|
| Early Diagnostic Assessment | 5% | No | Week 3 |
| Class Test | 35% | No | Week 8 |
| Final Examination | 60% | No | University Examination Period |
Early Diagnostic Assessment
Due: Week 3
Weighting: 5%
The Early Diagnostic Assessment is an online multiple choice quiz that will be held in Week 3 (week commencing 12 August 2019).
Type of Collaboration: Individual Submission: Online quiz to be taken at home during Week 3 (week commencing 12 August 2019). Format: Multiple-choice. Length: 1 hour. Inherent Task Requirements:Understanding of lecture/tutorial material covered from weeks 1-2 (inclusive).
Please use the quiz as an indicator of whether you are progressing satisfactorily in the unit. If you are having difficulties, please see the Unit Convenor and consider withdrawing before the submission date in Week 3 (week commencing 12 August 2019).
Late Submission:No extensions will be granted. Students who have not submitted the task prior to the deadline will be awarded a mark of 0 for the task, except for cases in which an application for special consideration is made and approved.
On successful completion you will be able to:
- Understand the concepts of option pricing theory and the role of derivatives
- Develop skills to price options and other derivatives.
- Examine the principles of hedging, arbitrage theory and structured products
Class Test
Due: Week 8
Weighting: 35%
The Class Test is scheduled to be held during regular lecture day and time in Week 8 (week commencing 30 September 2019). Refer to iLearn for further details (test venues and assessment criteria will be posted closer to the class test date).
No dictionaries of any kind are allowed in the class test. Non-programmable calculators are allowed, provided that they are not capable of storing text. During the exam you will be provided with a formula sheet (attached to the back of your exam paper). It will contain useful formulas that have been encountered during the course, however it the student's responsibility to identify the correct formula to be used for any particular question within the paper.
Type of Collaboration: Individual Submission: Completed in class during normal lecture hours in Week 8. Format: Short-answer/short-response questions including calculations. Length: Total time available for the class test is 90 minutes. Inherent Task Requirements: Understanding of lecture/tutorial topics covered in Weeks 1-6 (inclusive). Late Submission:No extensions will be granted. Students who have not submitted the task prior to the deadline will be awarded a mark of 0 for the task, except for cases in which an application for special consideration is made and approved.
On successful completion you will be able to:
- Understand the concepts of option pricing theory and the role of derivatives
- Apply financial derivatives such as forward/futures and options to solve quantitative problems
- Develop skills to price options and other derivatives.
- Examine the principles of hedging, arbitrage theory and structured products
Final Examination
Due: University Examination Period
Weighting: 60%
Examination conditions
The final exam is based on topics covered during lecture weeks 1 to 13, inclusive. No dictionaries of any kind are allowed in the final examination. Non–programmable calculators are allowed, provided that they are not capable of storing text.
You may NOT be permitted to bring in a cheat sheet, however, during the exam you will be provided with a formula sheet (attached to the back of your exam paper). It will contain useful formulas that have been encountered, during the course, however it the student's responsibility to identify the correct formula to be used for any particular question within the paper.
Type of Collaboration: Individual Submission:During examination period
Format: Short-answer/short-response questions including calculations. Paper-based. Length: 2 hours plus 10 minutes reading time Inherent Task Requirements: Understanding of lecture/tutorial material discussed from weeks 1-13 (inclusive), Late Submission:No extensions will be granted. Students who have not submitted the task prior to the deadline will be awarded a mark of 0 for the task, except for cases in which an application for special consideration is made and approved.
On successful completion you will be able to:
- Understand the concepts of option pricing theory and the role of derivatives
- Apply financial derivatives such as forward/futures and options to solve quantitative problems
- Examine the principles of hedging, arbitrage theory and structured products
Delivery and Resources
| Required Text: |
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| Unit Web Page: |
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| Technology Used and Required: | |
| Delivery Format and Other Details: |
Classes
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| Recommended Readings: | |
| Other Course Materials: |
Prizes Prizes for this unit (see). http://www.buisnessandeconomics.mq.edu.au/undergraduate_degrees/prizes_scholarships |
Unit Schedule
Lecture Week |
Lecture Topic |
1 |
Introduction to Derivatives and Mechanics of Futures Market |
2 |
Hedging Strategies using Futures |
3 |
Interest rates |
4 |
Determination of Forward and Futures Prices |
5 |
Swaps and Ethics |
6 |
Mechanics of Option Markets and Properties of Stock Options |
7 |
Trading Strategies Involving Options |
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BREAK |
8 |
CLASS TEST |
9 |
Introduction to Binomial Trees |
10 |
Valuing Stock Options: The Black Scholes Model |
11 |
Options on Stock Indices and Currencies and Futures Options |
12 |
Greek Letters |
13 |
Revision |
Policies and Procedures
Macquarie University policies and procedures are accessible from Policy Central (https://staff.mq.edu.au/work/strategy-planning-and-governance/university-policies-and-procedures/policy-central). Students should be aware of the following policies in particular with regard to Learning and Teaching:
- Academic Appeals Policy
- Academic Integrity Policy
- Academic Progression Policy
- Assessment Policy
- Fitness to Practice Procedure
- Grade Appeal Policy
- Complaint Management Procedure for Students and Members of the Public
- Special Consideration Policy (Note: The Special Consideration Policy is effective from 4 December 2017 and replaces the Disruption to Studies Policy.)
Undergraduate students seeking more policy resources can visit the Student Policy Gateway (https://students.mq.edu.au/support/study/student-policy-gateway). It is your one-stop-shop for the key policies you need to know about throughout your undergraduate student journey.
If you would like to see all the policies relevant to Learning and Teaching visit Policy Central (https://staff.mq.edu.au/work/strategy-planning-and-governance/university-policies-and-procedures/policy-central).
Student Code of Conduct
Macquarie University students have a responsibility to be familiar with the Student Code of Conduct: https://students.mq.edu.au/study/getting-started/student-conduct
Results
Results published on platform other than eStudent, (eg. iLearn, Coursera etc.) or released directly by your Unit Convenor, are not confirmed as they are subject to final approval by the University. Once approved, final results will be sent to your student email address and will be made available in eStudent. For more information visit ask.mq.edu.au or if you are a Global MBA student contact globalmba.support@mq.edu.au
Supplementary Exam
Information regarding supplementary exams, including dates, is available at
Student Support
Macquarie University provides a range of support services for students. For details, visit http://students.mq.edu.au/support/
Learning Skills
Learning Skills (mq.edu.au/learningskills) provides academic writing resources and study strategies to improve your marks and take control of your study.
Student Services and Support
Students with a disability are encouraged to contact the Disability Service who can provide appropriate help with any issues that arise during their studies.
Student Enquiries
For all student enquiries, visit Student Connect at ask.mq.edu.au
If you are a Global MBA student contact globalmba.support@mq.edu.au
IT Help
For help with University computer systems and technology, visit http://www.mq.edu.au/about_us/offices_and_units/information_technology/help/.
When using the University's IT, you must adhere to the Acceptable Use of IT Resources Policy. The policy applies to all who connect to the MQ network including students.
Graduate Capabilities
Capable of Professional and Personal Judgement and Initiative
We want our graduates to have emotional intelligence and sound interpersonal skills and to demonstrate discernment and common sense in their professional and personal judgement. They will exercise initiative as needed. They will be capable of risk assessment, and be able to handle ambiguity and complexity, enabling them to be adaptable in diverse and changing environments.
This graduate capability is supported by:
Learning outcomes
- Develop skills to price options and other derivatives.
- Examine the principles of hedging, arbitrage theory and structured products
Assessment task
- Class Test
Discipline Specific Knowledge and Skills
Our graduates will take with them the intellectual development, depth and breadth of knowledge, scholarly understanding, and specific subject content in their chosen fields to make them competent and confident in their subject or profession. They will be able to demonstrate, where relevant, professional technical competence and meet professional standards. They will be able to articulate the structure of knowledge of their discipline, be able to adapt discipline-specific knowledge to novel situations, and be able to contribute from their discipline to inter-disciplinary solutions to problems.
This graduate capability is supported by:
Learning outcomes
- Understand the concepts of option pricing theory and the role of derivatives
- Apply financial derivatives such as forward/futures and options to solve quantitative problems
- Develop skills to price options and other derivatives.
- Examine the principles of hedging, arbitrage theory and structured products
Assessment tasks
- Early Diagnostic Assessment
- Class Test
- Final Examination
Critical, Analytical and Integrative Thinking
We want our graduates to be capable of reasoning, questioning and analysing, and to integrate and synthesise learning and knowledge from a range of sources and environments; to be able to critique constraints, assumptions and limitations; to be able to think independently and systemically in relation to scholarly activity, in the workplace, and in the world. We want them to have a level of scientific and information technology literacy.
This graduate capability is supported by:
Learning outcomes
- Understand the concepts of option pricing theory and the role of derivatives
- Apply financial derivatives such as forward/futures and options to solve quantitative problems
- Develop skills to price options and other derivatives.
Assessment tasks
- Early Diagnostic Assessment
- Class Test
- Final Examination
Problem Solving and Research Capability
Our graduates should be capable of researching; of analysing, and interpreting and assessing data and information in various forms; of drawing connections across fields of knowledge; and they should be able to relate their knowledge to complex situations at work or in the world, in order to diagnose and solve problems. We want them to have the confidence to take the initiative in doing so, within an awareness of their own limitations.
This graduate capability is supported by:
Learning outcomes
- Understand the concepts of option pricing theory and the role of derivatives
- Apply financial derivatives such as forward/futures and options to solve quantitative problems
- Examine the principles of hedging, arbitrage theory and structured products
Assessment tasks
- Early Diagnostic Assessment
- Class Test
- Final Examination
Research and Practice
- This unit gives you practice in applying research findings in your assignments
- This unit gives you opportunities to conduct your own research