Page 63 - REC :: MBA CURRICULUM AND SYLLABUS :: R2019

Subject Code Subject Name (Theory course) Category L T P C
BA19P15 Financial Derivatives FE 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: Overview of the Indian derivatives market- Evolution of Commodity, Currency, 9
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: Introduction to Forwards-Futures contract- Margin Requirements – Marking 9
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: Types of Options – Differentiate European & American options– Call option and put 9
Option – option pricing models – Binomial Model – Black and Scholes – Volatility – Delta –
Gama – Theta – Vega– Rho– Estimation and Valuation – Define Value At risk.

UNIT-IV Swaps And Credit Derivatives: Swaps – Equity – Currency – Interest Rate– Types – Structure – 9
Pricing. Credit risk- Credit Derivatives-Asset Backed securities-Collateralized debt obligations-
Exotic Derivatives – Weather Derivatives.

UNIT-V Trading And Settlement System: Introduction to Index- Types of Indices- Trading system- 9
Selection criteria of stocks and Index for trading- Clearing Mechanism-Settlement Mechanism-
Risk management for F&O segment.

Total Contact Hours : 45

Course Outcomes:After completing the course, the Learners should be able to:
 Understand and apply the basic principles of financial derivatives.
 Understand and apply the advantages of futures contract and hedging principles.
 Understand various aspects related to options and its valuation and trading strategies.
 Will be able understand the methods in SWAPS.
 Will be able to know about credit derivatives and exotic options.

Text Book (s):
th
1 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
2
Learning, 2011.
nd
3 S Kevin, Commodity and Financial Derivatives, PHI Learning- 2 edition 2014.
nd
4 Rajiv Srivatsva, Derivatives and Risk Management, Oford University press 2 edition, 2014.

Reference Books(s) / Web links:
nd
1 Stulz, Risk Management and Derivatives, Cengage Learning, 2 Edition, 2011.
2 Varma, Derivatives and Risk Management, 2nd Edition, 2011.
3 David Dubofsky – ‘Option and Financial Futures – Valuation and Uses, McGraw Hill International Edition.
4 S.L.Gupta, Financial Derivatives- Theory, Concepts and Practice, Prentice Hall Of India, 2011.

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