Course
Outline
Course Title: Options, Futures and Other Derivatives
Course Code: FING 6710
Credit-Hour: 3 credit hours (45 total contact hours)
Prerequisite: FING 6501
Course Description:
In depth discussion of the theory and application of options, futures and derivative strategies and
vehicles for investment and trading performance enhancement and companies’ financial risk
mitigation. The course develops a general, but rigorous framework for valuing futures and
options contracts. There is a detailed study of the synthetic and derivative products. This course
focuses on the discussion of options, derivatives and swaps.
Course General Learning Goals
At the end of this course the student should be able to:
1. Understand the models that are applied to the analysis of Options, Futures and Swap.
2. Learn how derivatives are traded in different financial markets.
3. Understand and apply the main tools available for Derivatives price determination.
4. Understand how enterprises can use derivatives as an important tool for risk reduction
Strategies.
5. Learn and apply how financial entities use the swap market to minimize financial
volatility and maximize operating gains.
Learning Outcomes Addressed in this Course
This course is designed to enable students to develop the following competencies:
1. Communication skills - Team work for exercises, problems and cases; interact effectively
with individuals and groups
2. Information technology skills - The use of spreadsheets, word processor and internet for
accounting problems solutions
3. Ethical Reasoning - Class discussions
4. Analytical skills - Problems solutions; use quantitative reasoning processes to understand,
analyze, and solve financial problems
Options, Futures, other Deriv Syllabus
Content Outline and Time Distribution
Topics (based on textbook chapters) Contact Hours
1. Introduction 1.5
2. Structure of the Derivative Market 2.5 .
3. Principles of Pricing Forwards, Futures and Options on Futures 3.0
4. Futures Arbitrage Strategies 3.0
5. Forwards and Future Hedging, Spreads and Target Strategies 3.0
6. Interest Rate Forwards and Options 3.0
7. Principles of Option Pricing 3.0
8. Option Pricing Models: The Binomial Model 3.0
9. Option Pricing Models: Black-Scholes-Merton Model 4.0
10. Basic Options Strategies 3.0
11 Advanced Option Strategies 3.0
12. Swaps 3.0
13. Advanced Derivatives and Strategies 3.0
14. Financial Risk Management: Techniques and Applications 3.0
15. Managing Risk in an Organization 2.0
Total Sessions (Contact Hours) 45
Instructional Strategies
Although determined by the individual instructor, traditionally this course will incorporate the
following teaching/learning methods:
• Lectures
• Presentation and discussion of solutions to problems, cases, exercises
• Online classes
• Problem solving videos
Evaluation Strategies
Mid-term exams
Cases Discussions
Final Exam
Mid-term Exams
There will be 2 exams covering at least 5 chapters each.
Class Discussion
Homework Assignments
Students should be ready to discuss the homework assignments the week
following the discussion of the chapter.
Final Exam
Will be cumulative.
Grade
Computation
Weighted average of the different criteria
Criteria Weight (%)
Exam 1 25
Exam 2 25
Cases Discussions 20
Final Exam 30
Scale
90 – 100 A
80 – 89 B
70 – 79 C
60 – 69 D
You will be graded on your individual performance and not on a curve. Please note that your
final grade depends on your performance and not on your need.
You are supposed to come prepared to every class; there is no excuse. You must actively
participate on the subjects discussed. There is no excuse to come unprepared. Your level of
preparation will be tested in every meeting.
Off schedule classes and videos
The students must be willing and able to take classes in days/hours other than the scheduled by
the register office. Typically, those classes are on Saturday mornings.
You will be responsible for downloading the class videos.
Exams schedule
The students must take the exams the date announced by the professor. You should be ready to
take the exam on one-week notice. The objective is to cover one chapter per week. Each exam
should cover from 4 to 6 chapters.
Assessment of Learning
During the semester, the professor will be using several techniques that will help him to
determine your level of learning. The main purpose is to help students identify how much and
how well they are learning and to detect areas that may need reinforcement before determining
the final grade. These techniques will also help the professor to use more effective teaching
strategies. Among others, we could use:
• Pre-Post Test
• Homework
• A rubric could be created to assess students’ success
Required Textbook and Materials
Textbook
Chance Don and Brooks Robert. Introduction to Derivatives and Risk Management (with
Stock-Track Coupon), 10th edition, Cengage. ISBN-10: 1-305-10496-X and ISBN-13:978-1-
305-10496-9.
Student Companion site:
http://www.cengage.com/cgi-
wadsworth/course_products_wp.pl?fid=M20b&product_isbn_issn=9781305104969&toke
n=2D557632E7214DCC921EB24C1F4F758E508E4CF5946609BD6AD5D191C532B11
A792816AB54713E34F7A4D1A5AAB90EE2DF942C6715290522652062CED3BEDC6F
B236D08B9A38BBE1
You are responsible for buying (investing on) the book and other materials (i.e. power points).
The professor will not provide power points or other materials.
Journals
RISK
Journal of Derivatives
Derivatives Quarterly
Journal of Future Markets
Review of Derivative Research
Financial Analyst Journal
Supplemental Materials
Excel Spreadsheet, PowerPoint materials, calculator, library materials, the internet, and
handouts supplied by instructor.
Other Resources
• CBOE: http://www.cboe.com
• VIX: http://www.cboe.com/micro/volatility/introduction.aspx
• Bloomberg: http://www.bloomberg.com
• Wall Street Journal: http://online.wsj.com
• Securities and Exchange Commission – www.sec.gov
• Yahoo Finance – http://finance.yahoo.com
• Business Statistics – www.bizstats.com
• NASDAQ – www.nasdaq.com
• New York Stock Exchange – www.nyse.com
• Internal Revenue Service – www.irs.gov
Faculty/Campus Policies/Accreditation
Special Accommodations
Per the Americans with Disabilities Act of 1990 (Amended in 2008) and other related state and
federal laws, students with disabilities that requires special accommodations should let their
professor know as soon as possible to make the necessary arrangements. The Application for
Special Accommodations is available in the Deanship of Student Affairs
Acomodo Razonable
Conforme a la Ley ADA (Americans with Disabilities Act of 1990/Enmendada en 2008) y otras
leyes estatales y federales relacionadas, todo estudiante con impedimento que requiera un
acomodo razonable debe completar la Solicitud de Acomodo Razonable disponible en el
Decanato de Asuntos Estudiantiles, servicios estudiantiles, durante las dos primeras semanas de
clases. De aprobarse un acomodo razonable deberá presentarlo al profesor para coordinar la
administración de este.
Declaration of Diversity
The University of Puerto Rico, Rio Piedras Campus accepts and respects individual differences in
the dimensions of race, ethnicity, gender, sexual orientation, socioeconomic status, age,
functional diversity, political and religious beliefs or other ideologies. The institution will provide
a safe, positive and supportive environment for the exploration of the multiple dimensions of
diversity, equity and inclusion.
Declaración de Diversidad
La Universidad de Puerto Rico, Rio Piedras, acepta y respeta las diferencias individuales en
las dimensiones de raza, etnia, género, orientación sexual, estatus socioeconómico, edad,
diversidad funcional, creencias políticas y religiosas u otras ideologías. La institución
proveerá un ambiente seguro, positivo y de apoyo para la exploración de las múltiples
dimensiones de diversidad, equidad e inclusión.
Regulations on discrimination by sex and gender in the form of sexual violence
The University of Puerto Rico prohibits discrimination based on sex, sexual orientation, and gender
identity in any of its forms, including that of sexual harassment. According to the Institutional
Policy Against Sexual Harassment at the University of Puerto Rico, Certification Num. 130, 2014-
2015 from the Board of Governors, any student subjected to acts constituting sexual harassment,
may turn to the Office of the Student Ombudsperson, the Office of the Dean of Students, and/or
the Coordinator of the Office of Compliance with Title IX for an orientation and/or formal
complaint.
Normativa sobre discrimen por sexo y género en modalidad de violencia sexual
La Universidad de Puerto Rico prohíbe el discrimen por razón de sexo y género en todas sus
modalidades, incluyendo el hostigamiento sexual. Según la Política Institucional contra
Hostigamiento Sexual, Certificación Núm. 130 (2014-15) de la Junta de Gobierno, si un(a) estudiante es o está siendo afectado por conductas relacionadas a hostigamiento sexual, puede
acudir a la Oficina de la Procuraduría Estudiantil, el Decanato de Estudiantes o la Coordinadora de
Cumplimiento con Titulo IX para orientación y/o para presentar una queja”.
Ethics
Any academic fraud is subject to the disciplinary sanctions described in Articles 14 and 16 of the
revised General Student Bylaws of the University of Puerto Rico contained in Certification 018-
1997-98 of the Board of Trustees. The professor will follow the norms established in Articles 1-5
of the Bylaws.
Accreditation: The University of Puerto Rico is accredited by the Middle States Commission on
Higher Education, 3624 Market Street, Philadelphia, PA 19104 (1-267-284-5000). The Middle
States Commission on Higher Education is an institutional accrediting agency recognized by the
US Secretary of Education and the Council for Higher Education Accreditation. The Graduate
School of Business is associate member of the Association to Advance Collegiate Schools of
Business Administration (AACSB). The School of Business Administration, Rio Piedras Campus is
accredited by the AACSB.
The mission of the University of Puerto Rico, Rio Piedras Campus is:
1. To foster the integrated education of its students thru programs of study which promote
intellectual curiosity, the capacity for critical thinking, constant and ongoing learning, effective
communication skills, an appreciation for and cultivation of ethical and aesthetic values,
involvement in Campus governance, and a sense of social awareness and responsibility.
2. To provide graduate education of the highest quality, whose key elements are research and
creative activity, and which strengthens undergraduate education, and to provide post-
baccalaureate programs for the education and training of professionals of the highest caliber,
committed to the ideals and values of Puerto Rican society.
3. To provide an undergraduate education of excellence which offers students a unified vision of
knowledge that brings general education and specialization into harmony, and to foster in
students a capacity for independent study and research.
4. To develop teaching and research skills; to promote participation in the life of the community
as well as service to that community; to promote respect for the historical and social conditions
of Puerto Rico, taking into account its Caribbean and Latin American surroundings yet reaching
out into the international community; to enrich and strengthen the storehouse of knowledge
associated with de consolidation of Puerto Rican nationality, history, language, and culture; and
simultaneously to foster the growth and dissemination of knowledge at an international level.
5. To develop innovative, relevant programs of research, community service, and continuing
education which will support and contribute to the Campus’s academic and professional activity
and contribute to the transformation and continuing progress of Puerto Rican society, to the analysis of the Island’s socioeconomic and political problems, to the formulation of solutions to
those problems, and to the improvement of the quality of life.
Mission, Vision and Goals
University of Puerto Rico, Rio Piedras Campus, MBA Program
Vision of the MBA Program
The MBA Program will be one of excellent quality; the graduate students will be business
leaders with above average capabilities, motivation, creativity and professionalism.
Mission of the MBA Program
The MBA Program has as mission to form leaders, competent business managers in the
practice and integration of business sciences, and foster studies with strategic, global,
socially responsible and ethical perspective.
Goals Objectives
A. To develop the capability for critical thinking.
1. To develop and apply strategic thinking to face with success
uncertain business situations
2. To develop capabilities of interpretation, evaluation and
application of information and experiences
3. To develop the student thinking ability aiming to take decisions
for the solution of the Issues faced by businesses
B. To provide training for contributing to the organizational development of
the business and for interacting effectively with multidisciplinary and multicultural working groups.
1. To develop the capability for implement solutions when facing challenges, conflicts and confrontations coming from the organizations thru the collaboration, negotiation and conciliation among its members.
2. To develop the capability for supporting diversity in the work
environment.
C. To develop critical, ethical and inclusive leadership thru the technical and conceptual command of the business area.
1. To provide opportunities to know, understand and apply the principles and concepts of leadership, team development and interpersonal relations.
2. To develop the basic skills for the student can work on a global business environment emphasizing in integrating leadership and entrepreneurialism
D. To develop effective business communication skills.
1. To develop verbal communication skills, nonverbal and/or written communication capabilities to allow the student to successfully work in the business world.
E. To form professionals capable of taking
1. To integrate the ethical and socially responsible elements in the decision-making training.