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Options and Futures
Syllabus for FIN 5240
COURSE DESCRIPTION
This course introduces you to one of the fastest growing and innovating areas in finance — derivative markets. In the last 45 years, numerous types of derivative products have been created for better risk management and measurement. We will cover three most common types of derivatives (that is, forwards, futures, and options) and gain an in-depth understanding of the valuation and trading strategies involving these financial instruments. Our focus will first be on how forwards and futures are priced and used to manage various kinds of risks. Then, you will learn the mechanics of option markets, properties of stock options, and the binomial option pricing model. The goal of the course is to strive for a balanced combination of theories, computations, and applications.
TEXT/MATERIALS
The recommended textbook is Options, Futures, and Other Derivatives, 11th Edition, by John Hull, Pearson. Probably the most standard and popular text on derivative securities among academics, students, and practitioners, this book serves as a useful reference not only for this course but also for years to come in your finance profession. Earlier editions (7th — 10th) of the book are fine to use, too. While our lectures present topics in a self-contained manner, reading assigned chapters from the textbook will reinforce your learning from the lectures.
CANVAS
Course materials such as lecture notes, homework assignments, solutions to homework, and exam-related materials will be available on the course site in Canvas athttps://mycanvas.wustl.edu/. You can check your performance by using the "Grades" tool to access your assignment, quiz, and exam grades that will usually be available within a week after the assignment due date and quiz/exam date.
HOMEWORK
There arefive homework assignments, which provide you with an opportunity to apply the concepts and tools presented during lectures as well as monitor your performance and progress in the class.
Homework will be graded based on its completion. That is, you will receive full credit as long as you show effort in solving all the problems, regardless of the correctness of your answers — this is designed to encourage you to work on all the problems. Solutions will be posted after the class in which the assignment is due. Since this is a fairly technical course involving a lot of quantitative analyses, making individual effort in learning is really the key to survival and success. That is why all homework assignments are individual-based. You may discuss with classmates and use GenAI tools, but you must turn in your own work. Completed homework must be submitted through Canvas, and late submissions will not be accepted.
QUIZZES
There are two quizzes during the course (see Page 3 for quiz schedule). While homework is graded based on your effort, quizzes give me a chance to test you on how well you understand the topics covered in recent lectures and homework. You will be given 10-15 minutes at the beginning of a class to complete each quiz.
FINAL EXAM
The final exam will be given in class on Thursday, October 16, 6:15 一 9:15 p.m. All students are required to take it. The exam time is non-negotiable. If you foresee a conflict, please inform me by the end of the second week of the course. If you think you will miss the exam, please (1) immediately call or e-mail me prior to the exam time and (2) bring justifiable and reliable proof of absence.
Without clear and hard evidence, you will get no credit.
Important Policies on Tests (including Quizzes and Final Exam):
All tests are closed-book and closed-notes. Calculators with logarithm and exponential functions are allowed and necessary, but you must show how you calculate your results (e.g., mathematical expressions, etc.) instead of the results alone (except on multiple choice questions). Cell phones, laptops, tablets, and other electronic devices (e.g., smart watches) as well as GenAI tools are not permitted during a test. You may bring one 8.5” by 11” crib sheet with notes written or typed on both sides for all tests. Any form of collaboration including discussing questions and sharing answers with anyone (both inside and outside your class) during a test is strictly prohibited and will be considered as a violation of academic integrity.
PARTICIPATION
You are strongly encouraged to attend all classes and, in particular, to actively participate in class.
This will significantly enhance your learning experience. Attendance will be taken for each class and counted partially toward your participation. To engage you in class discussions, I reserve the right to make random calls, but I much prefer having volunteers to “cold-calling.”
GRADING
Your grade for the course will be determined by homework, quizzes, final exam, and participation. Following is the summary of weights on the various components that I will use to evaluate your performance in this course:
|
Homework |
20% |
|
Quizzes |
10% |
|
Final Exam |
65% |
|
Participation |
5% |
|
TOTAL |
100% |
Grades are non-negotiable. If you feel I have graded one of the course requirements incorrectly, please bring it to my attention immediately. Grade appeals must be submitted within a week after the grades are released. I certainly want all of you to receive the grades you have earned.