DERIVATIVES
Credits: 03
Course workload: 3 hours per Week (2 hours of
theory and 2 hours of practical)
Evaluation: Continuous Internal Assessment
- 50 marks
Semester-end Examination - 50 marks
Objective: To acquaint the students with the
risk management tools and give them the
practical exposure.
Pedagogy: Lectures, Case study discussions and
Seminars.
Module 1 : Introduction; Meaning of
derivatives, forwards and futures contract,
option, traders in futures and option markets,
functions of derivatives market, world
derivatives market.
Module 2 : Forwards and Futures contract -
Basics of forwards and futures, forwards and
futures market trading mechanism,
determination of forward prices, Valuation of
forwards and futures, stock index futures,
valuation of stock index futures,. Arbitrage
opportunities using futures
Module 3 : Option contracts - Types of
options, characteristics of option contracts,
buyer and seller attitudes, option position,
determination of option pricing, option
moneyness,
Module 4: Valuation of option - Value of an
option- intrinsic value, time value and factors
influencing time value. Pay off profiles of option
position. Put-call parity, models of valuation of
option, applicability of Black and Scholes Model
and Binomial Option pricing model.
Module 5: Swap contract - Meaning, types,
features of swaps, the swap market, economic
motives of swap. Valuation of swaps.
SUGGESTED MATERIAL
BOOKS
1. John C. Hull, Options, Futures, and
Other Derivatives.
2. John Hull, Fundamentals o f Futures and
Options Markets,
3. Robert McDonald, Derivative Markets
4. Franklin Edwards and Cindy Ma, Futures
and Options
5. R. Stafford Johns on and Carmelo
Giaccotto, Options and Futures
6. Mishra V, Financial Derivatives, Excel
Books.
7. Vohra and Bagri, Option s & Futures,
TMH
URLs
 http://www.geojit.com/derivatives/
futures-and-options-market-instruments
 http://www.icmrindia.org/casestudies
 http://www.moneycontrol.com
 http://premiacap.com/publications/
EDHEC_Working_Paper_Case_Studies_
and_Risk_Management.pdf
 http://www.investopedia.com/ask/
answers/12/derivative.asp
PRACTICAL COMPONENTS:
1. Students should visit a financial
institution dealing in commodity
derivatives and study the products
offered by it.
2. Students should individually select
various futures or options and watch the
behavior of these futures and options on
a day to day for 15 days to see how
futures and options might help mitigate
the risks of investors.
3. Applicability of excel to find out the
future and option price.