FINANCE 585: DERIVATIVE SECURITIES
INSTRUCTOR: Riaz Hussain OFFICE: 431 Brennan Hall
OFFICE HOURS: By appointment only.
TELEPHONE: Office 941-7497, secretary 941-4048, FAX: 941-4825, home 347-8077, e-mail: Send an email
OBJECTIVES: After successfully completing this course, the students will
1. Be able to use Maple to solve derivatives problems
2. Understand the nature of derivative securities
3. Know the principles of option valuation
4. Understand and be able to apply the Put-Call Parity Theorem
5. Understand the mathematical and economic basis of the Black-Scholes Option Pricing Model
6. Be able to use Treasury Securities to find the risk-free interest rate
7. Calculate the historical and implied volatility of a stock
8. Know the extensions of the Black-Scholes model
9. Develop the mathematical basis of simple option strategies
10. Analyze complex option strategies: covered-call writing, straddles, time and money spreads
11. Understand the Binomial Option Pricing Model
12. Be able to use options in various portfolio insurance techniques
CATALOGUE DESCRIPTION: The course develops the theory of option pricing based on the Black-Scholes model. It then applies these ideas to the use of options in investment strategies and in portfolio management. The students get hands-on experience with real-time data to assess the feasibility of various investment opportunities in options markets.
TEXT: Derivative Securities, by Riaz Hussain, University of Scranton, Scranton, PA, July 2012.
The students taking this course should read the Wall Street Journal on a daily basis. They should be able to look up interest rates, stock and option prices on the Internet.
PREREQUISITES: Fin. 508, Financial Management. Knowledge of calculus is helpful.
EXAMINATIONS: First Test: July 12, 2012
Second Test: July 23, 2012
Third Test: July 31, 2012
Final, August 2, 2012
All tests will be closed book, but the students are allowed to bring a formula sheet.
GRADING POLICY: The students grades will depend upon their mastery of the subject matter as evidenced by their performance in tests and classroom participation.
SCHEDULE: Tentatively, the course will cover the following topics:
Put-Call Parity Theorem
|3||July 10||Black-Scholes Option Pricing Model||5|
Volatility of a Stock
Extensions of the Black-Scholes Model
|6||July 17||Review and Discussion|
|7||July 19||Option Strategies: Simple||9|
Option Strategies: Complex
|9||July 24||Option strategies: Complex||10|
|10||July 26||Binomial Option Pricing Model||11|
Third testReview and Discussion
|13||August 2||Final Examination|