Financial Derivatives
0
2019-2020
02640350
Economics
Portuguese
Face-to-face
6.0
Elective
2nd Cycle Studies - Mestrado
Recommended Prerequisites
Basic knowledge on valuation methodologies and investment strategies in stock and interest rate markets.
Teaching Methods
Teaching methods: Theoretical-practical lectures based on expositive and interactive methods and through the use of audiovisual techniques. In these lectures students also carry out individual practical works and group discussion of problems in a real world framework. The theoretical-practical lectures are complemented with office hours for individual attendance.
Learning Outcomes
This is an introductory-medium level course on exchange-traded derivatives on financial assets. This course aims to provide an overview of the terminology and concepts particular to this field of finance and to develop basilar abilities to valuate derivatives and to use them as hedging devices. Therefore, students should be able to:
- Understand public information on financial derivatives and on their underlying assets.
- Apply basic pricing methodologies to forward, futures, swaps and options contracts.
- Design and evaluate derivatives strategies to hedge currency, interest rate and stock risks.
- Identify real world variables that drive away transaction prices of derivatives from their equilibrium values.
Work Placement(s)
NoSyllabus
I. Introduction:
1. Basic concepts on financial derivatives
2. Historical overview of futures and options
3. The underlying assets: stock indices and interest rates.
II. Forward and futures contracts:
4. Organization and procedures of the futures markets
5. Forward and futures contracts pricing theory: The “cost-of-carry” model
6. Arbitrage in practice,
7. Hedging.
III. Swaps:
8. Interest rate swaps: economic rationality and valuation
9. Currency swaps and currency-interest rate swaps.
IV. Options
10. Properties of option prices
11. Composite strategies
12. The binomial option pricing model
13. The Black-Scholes option pricing model
14. Options on stock indices, currencies and futures: valuation, hedging and insurance.
Head Lecturer(s)
Hélder Miguel Correia Virtuoso Sebastião
Assessment Methods
Continuous Assessment
Exam: 50.0%
Alternatively: Mixed Regime: A – 2 Works in group (25% each): 50.0%
Final Assessment
Exam: 100.0%
Bibliography
HULL, John C. — Options, futures and other derivatives. 5th ed.. Upper Saddle River : Prentice-Hall/Pearson Education International, 2003. [BP 336.76 HUL]
SEBASTIÃO, Helder — Lições de instrumentos financeiros derivados.