Opening Lecture

“Options & Futures (EBC2053)”

Paulo J.M. Rodrigues

Maastricht University SBE

Academic Year 2013/2014

P. Rodrigues Opening Lecture 1/15

Information

I The team:
I Sjoke Merk
I George Chioran
I Dr. Paulo J. M. Rodrigues (Block coordinator)

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What is the subject?

I Options & Futures:

I How do derivative markets work?
I How to determine the cash-flows of derivative contracts?
I How to price derivative contracts?
I How are derivative contracts used in practice?

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How are we going to cover the material?

I Mixture of textbooks and cases:

I Chapters in textbooks give you background knowledge:
I How to determine the cash-flows of derivative contracts?
I Cases give you an idea of the data and practical application
I How are derivative contracts used in practice?

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How are you going to be graded?

I You are expected to be present in the tutorials!

I You are allowed to miss a maximum of 2 tutorials.
I You will get a pass of fail from the tutorial part.
I In case you miss more than 2 tutorials or fail the participation
part you will have to turn in a participation resit.
I The final grade will be the grade from the final exam.
I You have to pass both categories individually in order to pass
the course!

P. Rodrigues Opening Lecture 5/15

Emails nobody needs!!!
I have a question concerning the formula sheet we will be getting
for the options and futures exam on friday: Will it be the same as
last year or will it be more extensive. In my opinion there are some
basic formulas missing on the sheet.
Those formulas are:
1. Expected value of return and its SD as well as the probability
distribution with its mean and SD or variance. 2. Formulas on how
to convert interest rates to different compounding intervals. 3. Par
yield of a bond 4. Determining forward rates from zero rates 5.
Minimum variance hedge ratio and the formulas for obtaining the
standard deviations of the change in s and f 6. Margins for writing
naked call and put options 7. Effective price obtained (also for
cross hedges) 8. Cost of carry 9. Forward rates from future rates
(for bonds) 10. Calculations of quoted price, cash price and
conversion factors for bonds.
I know that some of those formulars are quite basic and intuitive
but others in my opinion are not. Can we assume that those
formulas, not on the formula sheet will not be needed orOpening
P. Rodrigues do we Lecture 6/15
Topics for “Corporate and Venture Finance”

I Empirical Methods
I Capital Structure
I Private Equity and Venture Capital
I Initial Public Offerings
I Mergers & Acquisitions
I Corporate Risk Management
I Payout Policy and Liquidity Management

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Presentation of Papers

I State the research topic/question

I How is the analysis done?
I What are the results?
I Show the empirics
I Incorporate the overview article
I You have 45 minutes

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Case

1. Bank Capital Regulation

I How to stabilise the financial system?
I Theoretical papers on leverage ratio of banks
I Empirical papers on TBTF subsidy

2. Metallgesellschaft
I Risk management case
I Major german corporation went bankrupt due to hedging
activities
I Management needs to know what it is doing

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Case Write Up

I State the problem

I State theoretical and empirical results
I Give a clear argumentation. Back up statements with
citations or own analysis.
I Search for additional literature
I Provide your own conclusions and back them up
I You have 10 pages

P. Rodrigues Opening Lecture 10/15

Grading

I Every member of the group has to present!

I Grades for group presentation might differ for each group
member
I You might get awarded a bonus for active participating in
tutorials
I Case write ups are graded per group
I Plagiarism is penalised per group
I Free riders are identified during presentation

P. Rodrigues Opening Lecture 11/15

Timetable

Week Date Session Content

1 Tuesday Oct 29 Lecture 1 Opening Lecture
Friday Nov 1 Tutorial 1 Empirical Methods
2 Tuesday Nov 5 Tutorial 2 Capital Structure
Friday Nov 8 Tutorial 3 Venture Capital / Private Equity
3 Tuesday Nov 12 Tutorial 4 Initial Public Offerings
Friday Nov 15 Tutorial 5 Case: “Bank Capital Regulation”
4 Tuesday Nov 19 Lecture 2 Philipp Elsen, Transfer Partners
Friday Nov 22 Tutorial 6 Mergers & Acquisitions’
5 Tuesday Nov 26 Lecture 3 Christian Loy, A.T. Kearney
Friday Nov 29 Tutorial 7 Corporate Risk Management
6 Tuesday Dec 3 Tutorial 8 Case: “Metallgesellschaft”
Friday Dec 6 Tutorial 9 Payout Policies / Liquidity Management
7 Tuesday Dec 10 Tutorial 10 Review
Friday Dec 13 No session

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Dos

I Prepare for the tutorials.

I Participate in the tutorials also when you are not presenting.
I Present the, in your opinion, most relevant results of the
articles.
I Ask questions during the presentations.
I Try to motivate the audience to participate.
I Give also background information.

P. Rodrigues Opening Lecture 13/15

Don’ts

I Don’t come in unprepared!!!

I Don’t write mails with conceptual questions. If you have an
important question ask during the tutorial!
I Everybody should know how to behave in a group.
I Don’t try to perform individually. You are part of a team.
I “Is this going to be part of the exam?” is the wrong question,
every time.
I “Because this is how it’s done in the literature” is the wrong
answer, every time.

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 Do you have questions?

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