Programmi insegnamenti - Divisione Didattica

Università Bocconi
COURSE 2021-2022 A.Y.

30150 - INTRODUCTION TO OPTIONS AND

FUTURES

CLEAM, CLEF, BESS-CLES, WBB, BIEF, BIEM, BIG, BEMACS

Department of Finance

Course taught in English

Student consultation hours

CLEAM (6 credits - I sem. - OP | 3 credits SECS-P/11 | 3 credits SECS-

S/06) - CLEF (6 credits - I sem. - OP | 3 credits SECS-P/11 | 3 credits SECS-
S/06) - BESS-CLES (6 credits - I sem. - OP | 3 credits SECS-P/11 | 3 credits
SECS-S/06) - WBB (6 credits - I sem. - OP | 3 credits SECS-P/11 | 3 credits
SECS-S/06) - BIEF (6 credits - I sem. - OP | 3 credits SECS-P/11 | 3 credits
SECS-S/06) - BIEM (6 credits - I sem. - OP | 3 credits SECS-P/11 | 3 credits
SECS-S/06) - BIG (6 credits - I sem. - OP | 3 credits SECS-P/11 | 3 credits
SECS-S/06) - BEMACS (6 credits - I sem. - OP | 3 credits SECS-P/11 | 3

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 Programmi insegnamenti - Divisione Didattica

credits SECS-S/06)

Course Director:
ALBERTO MANCONI

Classes: 31 (I sem.) - 32 (I sem.)

Instructors:
Class 31: ALBERTO MANCONI, Class 32: ALBERTO MANCONI

Suggested background knowledge

SUGGESTED BACKGROUND KNOWLEDGE

This is a challenging course: a passion for finance, or a prior acquaintance with the world of
investment, will not guarantee a passing grade. A solid understanding of financial economics,
on the other hand, will go a long way. I assume that you are familiar with the mathematics of
interest rates (discounting/compounding, equivalence of rates at different maturities), with basic
statistics (expected values, standard deviation and variance, ordinary least squares), and
calculus (limits, differentials, differentiation, Taylor expansions, partial differentiation,
optimization, basic integration). Some concepts can be refreshed in class, but it is your
responsibility to ensure that you are comfortable with these background notions.

Mission & Content Summary

MISSION

Derivatives are a key class of financial instruments, crucial to the functioning of companies and
financial intermediaries, and at the center of regulatory debate. Nearly half of publicly traded
industrial corporations make use of financial derivatives for risk management; and these
securities are widely employed among financial firms such as investment banks and asset
managers. Among the public, there is also the perception of a "dark side" of derivatives, for
example in relation to the role they played in the development of the 2007-2008 financial crisis.

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 Programmi insegnamenti - Divisione Didattica

The purpose of this course is to make you familiar with the main kinds of derivatives, with an
emphasis on pricing and hedging issues, and on how investors and corporations can use these
instruments in practice.

CONTENT SUMMARY

The main contents of the course are:

Introduction to financial derivatives.

Futures: Institutional aspects, pricing, and hedging.
Swaps: Institutional aspects, pricing, and hedging.
Options: Institutional aspects, pricing, and hedging.
Basics of credit risk and credit derivatives (if time allows).

Intended Learning Outcomes (ILO)

KNOWLEDGE AND UNDERSTANDING

At the end of the course student will be able to...

Describe the institutional features of the main financial derivatives: forwards/futures,

swaps, and options.
Recognize basic credit derivatives, such as credit default swaps (CDS).
Explain how those securities are employed to form hedging strategies, in the context of
corporate risk management.
Define and explain the basic stochastic processes concepts used in the analysis of
financial derivatives, and to reproduce key derivations that utilize them.

APPLYING KNOWLEDGE AND UNDERSTANDING

At the end of the course student will be able to...

Acquire the basic tools to solve derivative pricing problems, via replicating/hedging
portfolios as well as with risk neutral pricing.
Apply those tools to the pricing of forwards/futures, the design of swaps, as well as the
pricing of options on binomial trees and with Black-Scholes valuation.

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 Programmi insegnamenti - Divisione Didattica

Teaching methods

Face-to-face lectures
face-to-face lectures
Exercises (exercises, database, software etc.)
in-class exercises
Case studies /Incidents (traditional, online)
traditional case studies

DETAILS

The learning experience of this course starts from face-to-face lectures. In addition to those,
I distribute problem sets on a weekly basis. The problem sets are not graded, but allow you to
apply the analytical tools illustrated in class and practice for the exam. I also discuss a number
of case studies, with the purpose of understanding how the tools you acquire in class can be
applied in the real world, where the environment is more complex and the relevant data are not
laid out as clearly as in your textbook. Throughout the course, and particularly when discussing
case studies, I encourage you to bring your own views and share your insights.

Assessment methods

Continuous Partial exams General exam

assessment
Written individual exam x x
(traditional/online)

ATTENDING AND NOT ATTENDING STUDENTS

The grade is determined by a combination of the performance on the final exam and on two
online tests, which are distributed during the course via Bboard.

On the first time you sit the exam, your grade is determined as (a) 70% times the grade
on the final exam plus 15% times the grade on each of the two online tests, or (b) 100%
times the grade on the final exam (whichever is more favorable to you).
For any resit, your grade is determined exclusively by the final exam, i.e. you forfeit the
score on the two online tests.

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 Programmi insegnamenti - Divisione Didattica

Both the online tests and the final exam include some multiple choice questions and
some open-ended questions.
In all cases, the questions aim to assess your understanding, knowledge, and ability to
apply the the concepts and tools you acquire during the course about hedging with
financial derivatives and pricing thereof.
They range from solving problems, to simple derivations based on the theory, to
discussions of the relevant institutional aspects of the securities we study.
There is no distinction between attending and non-attending students.

Teaching materials

ATTENDING AND NOT ATTENDING STUDENTS

The textbook is: J. Hull, Options, Futures, and Other Derivatives, Pearson. I have been
following the 9th edition; however any reasonably recent edition (including a more recent
one) work.
In addition to the textbook, we also read and discuss a number of case studies. The
cases are purchased by the Library for you, and are made available to you via a link,
which I publish on Bboard shortly after the start of the course.

Exam textbooks & Online Articles (check availability at the Library)

Last change 21/07/2021 14:37

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