Students

AFCP8004 – Financial Instruments

2020 – AFC term 3, Weekday attendance, City

General Information

Download as PDF
Unit convenor and teaching staff Unit convenor and teaching staff
Shane Magee
shane.magee@mq.edu.au
Contact via Email
Credit points Credit points
10
Prerequisites Prerequisites
AFCP801 or AFCP8001 or ECFS865
Corequisites Corequisites
Co-badged status Co-badged status
Unit description Unit description

This unit covers the structure, pricing and usage of various financial instruments, including spot, forward, swaps and option contracts for equity, debt, foreign exchange and commodity markets. This unit is concerned with understanding how these financial instruments work, how they are used by end users for speculation and risk management, how they are priced and valued, and how market makers manage their risks when they trade these financial instruments.

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:

  • ULO1: Explain and assess the characteristics and uses of various financial instruments such as forwards, futures, swaps, and options using different communication styles for different audiences.
  • ULO2: Analyse financial risks and develop appropriate hedging strategies to manage those risks.
  • ULO3: Explain, evaluate and apply the key concepts and models used to price and value financial instruments.
  • ULO4: Construct replicating portfolios for financial instruments and evaluate the importance of the replicating portfolio concept.
  • ULO5: Conduct independent research into specialised issues in applied finance.

General Assessment Information

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.

Further information on submitting an Application for Special Consideration can be found at https://students.mq.edu.au/study/my-study-program/special-consideration.

 

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.

Further information on submitting an Application for Special Consideration can be found at https://students.mq.edu.au/study/my-study-program/special-consideration.  

Final Exam (50%)

Refer to the relevant MAFC timetable for information on your online final exam 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.

Further information on submitting an Application for Special Consideration can be found at https://students.mq.edu.au/study/my-study-program/special-consideration.

Assessment Tasks

Name Weighting Hurdle Due
Online Quizzes 20% No Refer to iLearn
Assignment 30% No Refer to iLearn
Final Exam 50% Yes Refer to Timetable

Online Quizzes

Assessment Type 1: Quiz/Test
Indicative Time on Task 2: 12.00 hours
Due: Refer to iLearn
Weighting: 20%

There will be up to two online quizzes throughout worth 10%. The quizzes are designed to apply your knowledge throughout the term and to provide you with feedback on your performance. Each is 90 Minutes long and open book.
On successful completion you will be able to:
  • Explain and assess the characteristics and uses of various financial instruments such as forwards, futures, swaps, and options using different communication styles for different audiences.
  • Analyse financial risks and develop appropriate hedging strategies to manage those risks.
  • Explain, evaluate and apply the key concepts and models used to price and value financial instruments.
  • Construct replicating portfolios for financial instruments and evaluate the importance of the replicating portfolio concept.

Assignment

Assessment Type 1: Case study/analysis
Indicative Time on Task 2: 25.00 hours
Due: Refer to iLearn
Weighting: 30%

An individual assignment of up to 3,000 words
On successful completion you will be able to:
  • Explain and assess the characteristics and uses of various financial instruments such as forwards, futures, swaps, and options using different communication styles for different audiences.
  • Analyse financial risks and develop appropriate hedging strategies to manage those risks.
  • Construct replicating portfolios for financial instruments and evaluate the importance of the replicating portfolio concept.
  • Conduct independent research into specialised issues in applied finance.

Final Exam

Assessment Type 1: Examination
Indicative Time on Task 2: 25.00 hours
Due: Refer to Timetable
Weighting: 50%
This is a hurdle assessment task (see assessment policy for more information on hurdle assessment tasks)

An individual hurdle assessment that is 2 hours and 10 minutes. Closed book but with one study sheet and calculator permitted.
On successful completion you will be able to:
  • Explain and assess the characteristics and uses of various financial instruments such as forwards, futures, swaps, and options using different communication styles for different audiences.
  • Analyse financial risks and develop appropriate hedging strategies to manage those risks.
  • Explain, evaluate and apply the key concepts and models used to price and value financial instruments.
  • Construct replicating portfolios for financial instruments and evaluate the importance of the replicating portfolio concept.

1 If you need help with your assignment, please contact:

  • the academic teaching staff in your unit for guidance in understanding or completing this type of assessment
  • the Writing Centre for academic skills support.

2 Indicative time-on-task is an estimate of the time required for completion of the assessment task and is subject to individual variation

Delivery and Resources

CLASSES

Teaching: Online Zoom sessions

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.

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, Chrome 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.

Unit Schedule

Teaching block 1

Topic 1: Introduction to financial instruments

Topic 2: Financial risk management

Topic 3: Financial and commodity forwards and futures

Topic 4: Option pricing 1: Option relationships and the binomial pricing model

Teaching block 2

Topic 5: Option pricing 2: Black-Scholes option pricing model

Topic 6: Interest rate forwards and futures

Topic 7: Swaps

 

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.

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:

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

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 help you improve your marks and take control of your study.

The Library provides online and face to face support to help you find and use relevant information resources. 

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.

Changes since First Published

Date Description
26/05/2020 Error corrected in the unit schedule section.