ECG590B – Introduction to Derivatives –Spring 2009
Cox 200  - TT 11:45 – 1:00
Prof. Paul L. Fackler
4344 Nelson, 515-4535
paul_fackler@ncsu.edu
Office Hours: Thursday 2:30-3:30 or by appointment


</span>Course web site: http://www4.ncsu.edu/~pfackler/ECG590B

Course Description
This course will introduce students to derivative assets, inclusding futures, options and swaps. The risk and return on these assets will be examined, as will portfolios of the assets. Their role in hedging and risk management will be discussed as will pricing using binomial trees and Monte Carlo methods. The key role of arbitrage and of replicating and risk free portfolios in pricing will be emphasized.

Student Learning Outcomes
 By the end of this course, students will be able to:
.......recognize basic derivatives (forwards, options, swaps)
.......analyze risk and return on portfolios of assets
.......understand how derivatives are priced
.......understand and apply hedging strategies
.......compute numerical approximations using Monte Carlo methods

Required Textbook
Derivatives Markets, 2nd ed., Robert L. McDonald,  Pearson Addison-Wesley, 2006.

Grading Policy
Grades will be based on a series of homework sets (15%), 3 exams that will count for 20% of the grade each and a final exam (25%). Grades will be given on an A, B, C, D, F basis, to be interpreted as excellent, satisfactory, unsatisfactory, unacceptable and failing. Homework will be collected but not graded; you will receive one point for completion of a homework.

Homework Policies
You are encouraged to discuss homework problems with your classmates but should develop your own answers. I consider the homework to be an essential part of the learning process; you cannot learn the material in this course without actively attempting to do so. If you wait until a quiz before attempting to work problems you will be in for an unpleasant surprise.

Important Dates
March 11 – last day to drop without a grade
February 3 – 1st mid-term
February 26 – 2nd mid-term
March 31 – 3rd mid-term
April 30 – In-class final exam (8 AM)

Academic Integrity
You should be aware of University policy on academic integrity: see Code of Student Conduct.
The university has also adopted the following Honor Pledge:
     "I have neither given nor received unauthorized aid on this test or assignment."
It is assumed that students understand and agree with this pledge when submitting exams.

Students with Disabilities
Reasonable accommodations will be made for students with verifiable disabilities.
In order to take advantage of available accommodations, students must register with
     Disability Services for Students at 1900 Student Health Center, Campus Box 7509, 515-7653.
http://www.ncsu.edu/provost/offices/affirm_action/dss/
For more information on NC State's policy on working with students with disabilities, please see http://www.ncsu.edu/provost/hat/current/appendix/appen_k.html

 

Course Schedule (this is an approximation and may change during the semester)
Readings refer to chapters of the McDonald text

8-Jan

Class 1

Introduction

1

13-Jan

Class 2

Forwards and Options

2

15-Jan

Class 3

Portfolio Strategies

3

20-Jan

Class 4

Risk Management

4

22-Jan

Class 5

Financial Forwards and Futures

5

27-Jan

Class 6

Commodity Forwards and Futures

6

29-Jan

Class 7

Interest Rate Forwards and Futures

7

3-Feb

Class 8

Mid-term #1 (Chapters 1-7)

 

5-Feb

Class 9

Swaps

8

10-Feb

Class 10

Option Relationships (Parity etc.)

9

12-Feb

Class 11

Binomial Pricing

10

17-Feb

Class 12

Binomial Pricing (cont.)

11

19-Feb

Class 13

Black-Scholes

12

24-Feb

Class 14

Market Making/Delta Hedging

13

26-Feb

Class 15

Introduction to Exotic Options

 

3-Mar

Spring Break

 

 

5-Mar

Spring Break

 

 

10-Mar

Class 16

Financial Engineering and Security Design

14

12-Mar

Class 17

Mid-term #2 (Chapters 1-12)

15

17-Mar

Class 18

Corporate Finance Issues

16

19-Mar

Class 19

Real Options

17

24-Mar

Class 20

Lognormal Distribution

18

26-Mar

Class 21

Monte Carlo Pricing

19

31-Mar

Class 22

Mid-term #3 (Chapters 1-18)

 

2-Apr

Class 23

Brownian Motion/Ito’s Lemma

20

7-Apr

Class 24

Black Scholes Equation

21

9-Apr

Class 25

Exotic Options (cont.)

22

14-Apr

Class 26

Volatility

23

16-Apr

Class 27

Interest Rate Models

24

21-Apr

Class 28

Value at Risk

25

23-Apr

Class 29

Credit Risk

26

 

 

 

 

30-Apr

Final Exam

8-11PM (Thursday)