To pass this unit the student needs to (1) Achieve an aggregate mark of 50 or more, and; (2) Pass the Final Exam.

Information regarding Extension Requests

Online Quizzes (20%)

You are expected to make yourself available for assessment during the relevant quiz window.

Students who do not submit this task by the due date and time receive a result of zero. This penalty does not apply when an application for Special Consideration has been made and approved. 

Students who do not attempt the quiz receive a mark of zero. This penalty does not apply in cases where an application for Special Consideration has been made and approved.

Note: Applications for Special Consideration must be made within 5 (five) business days of the due date and time. 

Refer to MAFC Program Rules at https://mafcstudents.mq.edu.au/ for information on the University’s Special Consideration Policy.

 

Assignment (30%)

No extensions will be granted. There will be a deduction of 10% of the total available marks made from the total awarded mark for each 24 hour period or part thereof that the submission is late (for example, 25 hours late in submission incurs a 20% penalty). This penalty does not apply for cases in which an application for Special Consideration is made and approved.

Late submissions will be accepted up to 96 hours after the due date and time.

Note: Applications for Special Consideration must be made within 5 (five) business days of the due date and time. 

Refer to MAFC Program Rules at https://mafcstudents.mq.edu.au/ for information on the University’s Special Consideration Policy.

 

Final Exam (50%)

You are expected to present yourself for examination at the time and place designated in the relevant MAFC Timetable at https://www.mq.edu.au/about/about-the-university/faculties-and-departments/business/study-with-us/macquarie-applied-finance-centre/timetables.

Deferral of an examination is not permitted unless an application for Special Consideration is made and approved.

Students who do not attend receive a mark of zero. This penalty does not apply in cases where an application for Special Consideration has been made and approved.

Note: Applications for Special Consideration must be made within 5 (five) business days of the due date and time. 

Refer to MAFC Program Rules at https://mafcstudents.mq.edu.au/ for information on the University’s Special Consideration Policy.

CLASSES

Face-to-Face Teaching: Generally 36 hours.

Timetable: Detailed timetable for classes are on the Centre’s website at https://www.mq.edu.au/ about/about-the-university/faculties-and-departments/business/study-with-us/macquarie-applied-f inance-centre/timetables

Consultation Times:

Students who wish to contact any of the teaching staff may do so through:

• The unit’s iLearn site, in relation to general queries (so that all students may benefit); or
• Individual consultation with the lecturer by email in the first instance, if necessary.

REQUIRED AND RECOMMENDED TEXTS AND/OR MATERIALS

Text: Notes will refer to the McDonald, Robert L. Derivatives MARKETS (3rd edition). Pearson Education/Prentice Hall, Upper Saddle River, New Jersey 2013. A lower cost version is available, Pearson New International Edition: ISBN 9781292021256.

Additional Readings:

• Additional readings are included in iLearn.
• These readings are examinable.

Lecture Notes: Available electronically via iLearn.

Study Problems: Students are required to work systematically through suggested problem sets. These problems will not be collected but they will help you prepare for the exams. Answers to the problems will be posted on the unit’s iLearn site.

Pre-unit Materials: Information papers on statistics, regression, accounting and other material may be found at http://mafcstudents.mq.edu.au/new-to-mafc/pre-course-materials/. Students should work through this material prior to commencing the degree. The material will remain a useful reference as students progress through the program.

Useful References:

• Bodie, Kane and Marcus, Investments, McGraw Hill, 11th edition, 2014.
• Hull, Fundamentals of Futures and Options Markets, Pearson Education/Prentice Hall, 8th edition 2013.
• McDonald, Fundamentals of Derivatives Markets, Prentice-Hall, 2009.

Calculators:

• A financial calculator that can handle time value of money calculations, logs and power functions is required.
• The Hewlett Packard calculator hp17bII+ isrecommended.
• In examinations, hand held calculators are permitted. Mobile phones and computers are not permitted.

Assumed Access:

• Access to a computer with word processing and spreadsheet capability is assumed, as is general student computer literacy.In particular, students shouldbe comfortable to opena blank spreadsheet and code formulae into cells in order to make that spreadsheet do somethinguseful.Students who find this daunting will struggle with the case studies.
• Also assumed is access to a Web browser (for example, Safari, Internet Explorer or Firefox) and email software and a student’s own connection to an internet service provider.

TECHNOLOGY USED AND REQUIRED

Unit iLearn Site:

• Found by logging on to iLearn ilearn.mq.edu.au, then clicking on AFCP8004 Financial Instruments.
• This is where you will find forums, downloadable resources and links to important pages.
• The forum allows you to communicate with other students and lecturer(s) and may provide supplementarymaterial.
• You are requested to post your questions on the forums at least 24 hours prior to the assignment submission date or the examination date. Questions posted after that time maynotbeanswered.Please try to not leave your questions to the last few days.

Important Notice:

• It is important that you familiarise yourself with the unit’s iLearnsite.
• Students should check the unit’s iLearn site regularly (minimum twice a week and prior to all lectures) and look for updates and distribution of materials (including case studies) related to the unit or assessments and, if relevant,participate in forum discussions.

PART 1

1. INTRODUCTION TO FINANCIAL INSTRUMENTS (1 ½ SESSIONS)

Topics:

• What is a financial instrument?
• An overview of financial markets
• Buying and short selling financial instruments
• The building block financial instruments

Readings:

• McDonald Chapter 1, 2,3.2

2. FINANCIAL RISK MANAGEMENT (1 ½ SESSIONS) Topics:

• Hedging strategies using forwards and options
• Hedging strategies using futures

• Why do firms hedge?

Readings:

• McDonald Chapter4
• Hull, Fundamentals of Futures and Options Markets, pages 47-61
• McDonald, Fundamentals of Derivatives Markets, pages 114-119
• Stulz, Rethinking Risk Management
• Sundaram and Das, Derivatives: Principles and Practice, pages 42-45

3. FINANCIAL AND COMMODITY FORWARDS AND FUTURES (2 SESSIONS)

Topics:

• A framework for pricingforwards
• Futures contracts
• Currency contracts
• Commodity contracts

Readings:

• McDonald Chapter 5.1-5.6
• McDonald, Fundamentals of Derivatives Markets, pages164-181
• Sundaram and Das, Derivatives: Principles and Practice, pages 46-53

4. OPTION PRICING 1: OPTION RELATIONSHIPS AND THE BINOMIAL OPTION PRICING MODEL (1 SESSION)

Topics:

• Put-call parity
• Properties of option prices
• Pricing options using the binomial model

Readings:

• McDonald Chapter 9,10
• Chance, Essays in Derivatives, Essay 16
• Chance, Essays in Derivatives, Essay 31

PART 2

5. OPTION PRICING 2: BLACK-SCHOLES OPTION PRICING MODEL (2 SESSIONS)

Topics:

• Pricing options using the Black-Scholesmodel
• Option Greeks
• Implied volatility

Readings:

• McDonald Chapter 12

6. INTEREST RATE FORWARDS AND FUTURES (2 SESSIONS)

Topics:

• Bonds
• Interest rate sensitivity
• Forward rate agreements and short-term interest rate futures
• Bond futures
• Repurchase agreements

Readings:

• McDonald Chapter 5.7,7
• Whaley, Derivatives: Markets, Valuation and Risk management, pages 666-669

7. SWAPS (2 SESSIONS)

Topics:

• Introduction to swaps
• Interest rateswaps
• Currency swaps
• Total rate of return swaps
• Swaptions

Readings:

• McDonald Chapter8

• Sundaram and Das, Derivatives: Principles and Practice, pages589-593

Learning and Teaching Activities

Strategy

The Master of Applied Finance degree adopts a deep teaching and learning strategy, in which students acquire and retain knowledge and also are able to make sense of the issues and concepts and apply them in the “real world”. The degree relies heavily on student engagement and participation by:

(a) Continuous learning throughout the term. This is encouraged through a combination of students undertaking prescribed reading throughout the units and/or completion of practice problems, case studies, assignments, class presentations etc and interaction via forums in the unit’s iLearn site; and

(b) Assessments, which enable the student to demonstrate his/her understanding of the learning objectives achieved through the continuous learning.

Student Participation

Students participate in this unit by:

(a) Attending lectures and participating in class discussion;

(b) Before each class, completing the recommended readings of notes and text, and working systematically through suggested problem sets;

(c) Interacting on the unit’s iLearn site; and

(d) Completing all assessment tasks and exams. On average, the unit will require students to complete, for every hour of class time, approximately 3 hours privatestudy.