FinDerviatives CourseOutline

GITAM FinTech Academy
GITAM Institute of Management

MBA(FinTech) Programme
Course Outline: MFT706 - FINANCIAL DERIVATIVES
Credits: 4.0 No. of contact-class sessions: 40

Trimester-III, Jan-2019
Course instructor: Leben Johnson
Introduction
Financial Markets are the lifeblood of an economy and country. Over the years financial markets have evolved from the good
old barter system of exchanging commodities to complex exotic options and derivatives, which most organisations are
dependent on. Since the financial deregulations in 1991, Indian economy has grown significantly and businesses have learnt
and tapped the other sources of capital, than just bank loans. Financial Derivatives are instruments that derive their value on
the underlying asset, be it stocks, currency or commodities. This course is designed for those individuals, who plan to become
financial analysts in organisations to help them manage their capital more efficiently by hedging the financial risk exposure
or within financial institutions that advice and manage client funds.
This course will introduce the students to Futures, Forwards, Option and Swaps. It also lays the foundation of how these
instruments can be effectively used to mitigate the risk exposure of an organisation due to currency fluctuation, interest rate
changes and price crashes.
Learning Objectives
- To understand the basic concepts of Forwards Trading, Futures Trading& Options Trading.
- To understand the basic concepts of Currency and Interest Rates Swaps and apply them to hedge risk exposure.
- To understand the basic concepts of Option Pricing Models (Binomial and Black Scholes).
- To apply the relevant concepts in the project report.
Pedagogy
Lectures, Self-leaning, Workshop, Demo of Trading Systems at BSE and NSE.
Evaluation
5% - First Quiz
5% - Second Quiz
15% - Mid-term
15% - Cases/Project/Class Participation
60% - Term End Examination
Quiz
- Best two quiz marks will be considered of the three quizzes conducted, no make-up quiz will be conducted.
Students need to ensure they are present for atleast two quizzes.
- Quizzes are to be taken only in the computer room in the presence of faculty, passwords cannot be shared.
Project Assignment
Groups with 6 students at random will be formed through Glearn, who will be assigned group projects. The group as a team
would need to present their project findings and report to the class within a week. They will be evaluated on the thoroughness
of research, teamwork, use of Excel as the modelling tool and presentation skills. The project will be relevant to the current
topic being taught in the class. Only two groups at a time will be provided the topic and they would need to submit their
report and present their case to the class in the following week.
Weekly Sessions:
As this is a 4-Credit course, there will be three classes in a week. One class will be dedicated for two groups to present their
project reports to the class, along with recap of the self-learning topic of the previous week. Marks will be assigned for
questions asked and answered. Students are supposed to attend the class after having read the self-learning topic and have
their questions/doubts answered. The benefits for trimester style classes is continuous learning, which will only come with
each student coming prepared, interacting and sharing their thoughts.
Text Book
Financial Derivatives, Theory, Concepts & Problems by S.L.Gupta, PHI Learning Pvt Ltd.
Derivatives and Risk Management, by R. Madhumathi and M. Ranganatham, Pearson
Additional Reading
Keeping abreast on current news within the financial markets.
Course Details: MFT706- FINANCIAL DERIVATIVES
Objective: This course will introduce the students to the Financial Derivatives markets of Futures, Forwards, Option and
Swaps. It also lays the foundation of how these instruments can be effectively used to mitigate the risk exposure of an
organisation due to currency fluctuation, interest rate changes and price crashes.
UNIT-I:
Introduction of Financial Derivatives –types of derivatives- Trading mechanism and contracts of the main Financial
Derivatives instruments: Clearing and settlement of trades, margin trading.
UNIT-II:
Forwards and Futures trading and differences between them: Trading in Forwards, Futures: theory, pricing and hedging
strategies for foreign exchange, short and long-term interest rate and Index Futures.
UNIT-III:
Options trading Strategies – Spreads (Bull Spreads, Bear Spreads and Butterfly Spreads) – Combinations (Straddles,
Strangles, Strips and Straps).
UNIT-IV:
Options Market: Trading and hedging using Options; equity Options; Options vs. Futures. Option pricing using Black-
Scholes Model and Binomial Analysis; Options on Stock Indices and currency; Option Greeks; Exotic Options.
UNIT-V:
Swaps Markets: Structure, currency, interest-rate, equity and commodity Swaps- pricing of swaps –pricing simulations.
Session Plan: MFT706 - FINANCIAL DERIVATIVES

Quiz/
Week Exam Marks Weekly Class Topics Pre-Class Self-Learning Topic
Schedule, Fundamentals of Financial History of Financial Derivatives
1 Derivatives, Regulations in India markets in India
2 Recap, Derivatives markets Financial Derivatives Instruments
Difference between Forwards &
3 Quiz-1 5 Recap,Futures Market Futures
4 Forwards Market, Futures Pricing What and Why is hedging required
Hedging Strategy using Futures,
5 Quiz-2 5 Stock Index Futures Global Financial Derivatives market
Short Term, Long Term Interest-Rate Interest rates and impact in
6 Mid-Term 15 Futures economy
7 Foreign Currency Futures Money Supply and Monetary Policy
8 Option Basis Typical Options Contract
9 Option Pricing models, Trading, Option Fundamentals
10 Quiz-3 Hedging currency options Hedging using Exotic Options
11 Swap Markets, Foreign Currency Swaps.
12 Final 60
15 Project/ Workshop
Total 100
CASE Analysis
During the course 3-caseswill be reviewed. Cases will be distributed or uploaded into Glearn. As these cases are under
copyright protection, no photocopies, scanning, photographs, uploading onto net, e-mail etc or duplication of any kind is
permitted, without explicit permission. These cases should only be used exclusively for this class.
For case preparation, students should read the case themselves, discuss in their individual groups and bring their analysis and
questions to the case presentation class. This will ensure the session is highly interactive. Students will be graded in the class
based on their participation. If the faculty feels that a person or team has not prepared adequately, they will be asked to leave
the class.

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GITAM FinTech Academy

GITAM Institute of Management

Credits: 4.0 No. of contact-class sessions: 40

Course instructor: Leben Johnson

Session Plan: MFT706 - FINANCIAL DERIVATIVES

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