Financial derivatives - options, futures, and swaps. Topics include: structures of the markets for exchange traded and over-the counter derivatives, identification and exploitation of arbitrage opportunities, use and misuse of derivatives to hedge risk in both financial and product markets. Prerequisites: BSAD 180; Minimum Junior standing; Business Administration major or minor.
Prereqs enforced by the system: BSAD 180; Minimum Junior Standing BSAD majors and BSAD minors only; Open to Degree and CDE students.
Financial derivatives - options, futures and swaps. Topics include: structures of the markets for exchange traded and over-the counter derivatives; identification and exploitation of arbitrage opportunities; pricing of forwards, futures, options, and convertible bonds, use of derivatives to hedge risk in both financial and product markets. Prerequisites: BSAD 180. Exercises and discussions include topics related to managing environmental risks (in particular hedging weather related events in a potentially more uncertain climate environment) and environmental markets (in particular the EPA Sulphur Dioxide emissions allowance auction done through the Chicago Board of Trade). The focus on environmental risk is ex-post; assuming environmental risks, how can an institution hedge against them. The discussion on the SO2 emissions allowance auction relates to how markets might be harnessed to help improve the environment.
Class attendance is very important to your understanding of the material as there is no text required for the course. While the exams are not cumulative the material by nature is. Students unable to take an exam, for a legitimate excused absence, may take a cumulative final to make up for the missed exam; a separate make-up will not be given.
The course is evaluated through exams (two) quizzes (five to six a semester), and homework (two major projects involving Excel and Bloomberg).
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