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Department of MBA, REC
BA17E13 FINANCIAL DERIVATIVES L T P C
3 0 0 3
OBJECTIVES
To enable students understand the nuances involved in derivatives
To enable students understand the basic operational mechanisms in derivatives
UNIT I INTRODUCTION 9
Overview of the Indian derivatives market- Evolution of Commodity, Currency, Stocks and Interest Rate
Derivatives - Structure of Derivative Markets, Reasons for Trading: Risk Management, Speculation and
Arbitrage – OTC and Exchange Traded Markets - Uses and Advantages of Derivatives.
UNIT II FUTURES CONTRACT 10
Introduction to Forwards-Futures contract- Margin Requirements – Marking to Market – Types of Futures
Contracts – Securities, Stock Index Futures, Currencies and Commodities – Relationship between Future
Prices, Forward Prices and Spot Prices – specification of a futures contract-Hedging using Futures
UNIT III OPTIONS 9
Definition – Exchange Traded Options, OTC Options – Specifications of Options – Call and Put Options –
American and European Options – Intrinsic Value and Time Value of Options – Option payoff, options on
Securities, Stock Indices, Currencies – Options pricing models – Black- Scholes model -Hedging using
Options-Option trading strategies-Option Greeks –Value at Risk
UNIT IV SWAPS AND CREDIT DERIVATIVES 10
Mechanics of Interest Rate SWAP – Swap to transform asset and liability-Currency SWAP – Valuation of
Interest rate and Currency swaps- Credit risk- Framework - Types of credit risks, Assessment of credit risk -
Credit Derivatives-Valuation of Credit Default Swaps- - Total return swaps-Asset Backed securities-
Collateralized debt obligations
UNIT V TRADING AND SETTLEMENT SYSTEM 7
Introduction to Index- Types of Indices- Trading system- Selection criteria of stocks and Index for trading-
Clearing Mechanism-Settlement Mechanism-Risk management for F&O segment
TOTAL: 45 PERIODS
OUTCOMES
After completing the course, the Learners should be able to:
1. Understand and apply the basic principles of financial derivatives.
2. Understand and apply the advantages of futures contract and hedging principles.
3. Understand various aspects related to options and its valuation and trading strategies.
4. Will be able understand the methods in SWAPS.
5. Will be able to know about credit derivatives and exotic options
TEXTBOOKS
th
John.C.Hull, Options, Futures and other Derivative Securities’, PHI Learning, 9 Edition, 2012
Keith Redhead, ‘Financial Derivatives – An Introduction to Futures, Forwards, Options and SWAPs’,– PHI
Learning, 2011.
nd
S Kevin, Commodity and Financial Derivatives, PHI Learning- 2 edition 2014
nd
Rajiv Srivatsva, Derivatives and Risk Management, Oford University press 2 edition, 2014
Curriculum and Syllabus | Master of Business Administration | R2017 Page 59
