Course coordinator
Dr Godfrey Smith
Course overview
- Study period
- Semester 2, 2024 (22/07/2024 - 18/11/2024)
- Study level
- Undergraduate
- Location
- St Lucia
- Attendance mode
- In Person
- Units
- 2
- Administrative campus
- St Lucia
- Coordinating unit
- Business School
Introduces forwards, futures and options as securities for risk management and speculation. Exposures to equity, currency, interest rate and commodity risk are examined. Pricing derivatives using analytical and numerical techniques.
In the last three decades, there have been some remarkable losses seen in the financial markets; for example, the October 1987 market crash, 1998 LTCM crisis, the 2007-2008 subprime mortgage crisis, and the COVID19 market jolt, to name but a few. Accordingly, organisations have embraced sound risk management practices to avoid exposing themselves to unnecessary financial risks on the one hand, and take calculated risks on the other. In particular, organisations have embraced derivatives as a risk management and hedging vehicle to the extent that many corporations now feature risk management divisions. It is likely that risk management issues will continue to arise in the majority of business scenarios. With these in mind, this course is designed to equip students with the essential frameworks and tools needed to understand and effectively manage financial risks. The primary focus will be on pricing and managing risk with derivatives, particularly forwards, futures, options and swaps, using various state-of-the-art techniques.
Course requirements
Assumed background
it is beneficial for students to have at least completed an Introduction to Finance course to gain an understanding of valuation principles and risk concepts. Students will also benefit from having completed FINM2415 (previously FINM3401).
Before attempting this course, students are advised that it is important to complete the appropriate prerequisite course(s) listed on the front of this course profile. No responsibility will be accepted by the School of Business, the Faculty of Business, Economics and Law or the University of Queensland for poor student performance occurring in courses where the appropriate prerequisite(s) has/have not been completed, for any reason whatsoever.
Prerequisites
You'll need to complete the following courses before enrolling in this one:
FINM2401 or 2411 or 2412 or 2416
Course contact
Course staff
Lecturer
Dr Godfrey Smith
Timetable
The timetable for this course is available on the UQ Public Timetable.
Additional timetable information
Please note: Teaching staff do not have access to the timetabling system to help with class allocation. Therefore, should you need help with your timetable and/or allocation of classes, please ensure you email business.mytimetable@uq.edu.au from your UQ student email account with the following details
- Full Name
- Student ID
- Course Code
Aims and outcomes
The aims of the course are for the student to gain a solid understanding of (i) the operation of derivatives markets, (ii) a wide range of derivative products and how they can be used to manage and speculate risk, and of (iii) valuing derivatives (particularly forward, futures, options and swaps) using different analytical and numerical methods.
Learning outcomes
After successfully completing this course you should be able to:
LO1.
Identify different derivative products that are available in the financial market.
LO2.
Understand the operation of derivatives markets (options, futures, forwards and swaps).
LO3.
Master the fundamental concepts in pricing derivative instruments using various state-of-the-art techniques.
LO4.
Demonstrate how a range of derivative products can be used to hedge and speculate market risk.
LO5.
Work collaboratively in a team to collect and analyse financial/derivative data, and price/evaluate different financial derivatives.
Assessment
Assessment summary
| Category | Assessment task | Weight | Due date |
|---|---|---|---|
| Paper/ Report/ Annotation, Reflection |
Team Project
|
30% (Report 25%; Reflection 5%) |
Report 4/10/2024 11:00 pm Reflective Piece - Individual 8/10/2024 11:00 pm Peer Assessment - Individual 8/10/2024 11:00 pm |
| Examination |
In-Semester Exam
|
20% Individual |
In-semester Saturday 31/08/2024 - 14/09/2024 |
| Examination |
Final exam
|
50% Individual |
End of Semester Exam Period 2/11/2024 - 16/11/2024 |
Assessment details
Team Project
- Team or group-based
- Mode
- Product/ Artefact/ Multimedia, Written
- Category
- Paper/ Report/ Annotation, Reflection
- Weight
- 30% (Report 25%; Reflection 5%)
- Due date
Report 4/10/2024 11:00 pm
Reflective Piece - Individual 8/10/2024 11:00 pm
Peer Assessment - Individual 8/10/2024 11:00 pm
- Other conditions
- Peer assessed, Peer assessment factor.
- Learning outcomes
- L01, L02, L03, L04, L05
Task description
Students are required to work in teams of 4 students for this Team Project.
The Team Project has three components: a Report (25%), a Reflective Piece (5%) and a compulsory Peer Assessment Review.
- The Report is to be submitted to both Blackboard and Turnitin. One member per group is to submit the Report on behalf of the team.
- The Reflective Piece is to be submitted to Blackboard. This is an individual submission item.
- The Peer Assessment Review is an individual submission item.
Your team is required to produce a Report on a set of cases using various financial derivatives instruments. The Report should cover computation, theory discussion and hedging suggestions. The Report focuses on examining your critical analytical skills and ability to work with real-life case scenarios. You are expected to undertake a certain amount of research to complete this Report.
You are also required to complete a Reflective Piece and Peer Assessment Review individually after your team has submitted the Report. The Peer Assessment Review will be used to compute your final grade on the Report (25%). Completing the Peer Assessment Review is mandatory. If you do not submit a Peer Assessment Review form, you will receive a score of zero on the Report. The Peer Assessment Review will be completed on Blackboard and is integrated into the Blackboard teams.
Further details about the Team Project will be discussed during the semester.
This assessment task evaluates students' abilities, skills and knowledge without the aid of generative Artificial Intelligence (AI) or Machine Translation (MT). Students are advised that the use of AI or MT technologies to develop responses is strictly prohibited and may constitute student misconduct under the Student Code of Conduct.
Submission guidelines
- The Report is to be submitted to both Blackboard and Turnitin. One member per group is to submit the Report on behalf of the team.
- The Reflective Piece is to be submitted to Blackboard. This is an individual submission item.
- The Peer Assessment Review is an individual submission item.
Deferral or extension
You may be able to apply for an extension.
Late submission
A penalty of 10% of the maximum possible mark will be deducted per 24 hours from time submission is due for up to 7 days. After 7 days, you will receive a mark of 0.
In-Semester Exam
- Identity Verified
- In-person
- Mode
- Written
- Category
- Examination
- Weight
- 20% Individual
- Due date
In-semester Saturday
31/08/2024 - 14/09/2024
- Other conditions
- Time limited.
- Learning outcomes
- L01, L02, L03, L04
Task description
- The In-Semester Exam will be held during the In-Semester Exam period on one of the following Saturdays: August 31, September 7 or September 14.
- The date will be advised as soon as we are made aware by the university. At this stage, you should keep all these Saturdays free.
- The topics of coverage depend on the date of the exam, and will include topics covered in the course up to the tutorial prior to the exam.
- More details about the In-Semester Exam will be posted on Blackboard.
This assessment task evaluates students' abilities, skills and knowledge without the aid of generative Artificial Intelligence (AI) or Machine Translation (MT). Students are advised that the use of AI or MT technologies to develop responses is strictly prohibited and may constitute student misconduct under the Student Code of Conduct.
Exam details
| Planning time | 10 minutes |
|---|---|
| Duration | 90 minutes |
| Calculator options | (In person) Casio FX82 series or UQ approved , labelled calculator only |
| Open/closed book | Closed Book examination - no written materials permitted |
| Exam platform | Paper based |
| Invigilation | Invigilated in person |
Submission guidelines
Deferral or extension
You may be able to defer this exam.
Final exam
- Identity Verified
- In-person
- Mode
- Written
- Category
- Examination
- Weight
- 50% Individual
- Due date
End of Semester Exam Period
2/11/2024 - 16/11/2024
- Other conditions
- Time limited.
- Learning outcomes
- L01, L02, L03, L04
Task description
The final exam will be a closed-book, in-person, paper based exam held in the end of semester, centrally managed and invigilated exam period, consisting of problem-solving and short-answer questions.
This assessment task evaluates students' abilities, skills and knowledge without the aid of generative Artificial Intelligence (AI) or Machine Translation (MT). Students are advised that the use of AI or MT technologies to develop responses is strictly prohibited and may constitute student misconduct under the Student Code of Conduct.
Exam details
| Planning time | 10 minutes |
|---|---|
| Duration | 120 minutes |
| Calculator options | (In person) Casio FX82 series or UQ approved , labelled calculator only |
| Open/closed book | Closed Book examination - no written materials permitted |
| Exam platform | Paper based |
| Invigilation | Invigilated in person |
Submission guidelines
Deferral or extension
You may be able to defer this exam.
Course grading
Full criteria for each grade is available in the Assessment Procedure.
| Grade | Cut off Percent | Description |
|---|---|---|
| 1 (Low Fail) | 0 - 29 |
Absence of evidence of achievement of course learning outcomes. |
| 2 (Fail) | 30 - 46 |
Minimal evidence of achievement of course learning outcomes. |
| 3 (Marginal Fail) | 47 - 49 |
Demonstrated evidence of developing achievement of course learning outcomes |
| 4 (Pass) | 50 - 64 |
Demonstrated evidence of functional achievement of course learning outcomes. |
| 5 (Credit) | 65 - 74 |
Demonstrated evidence of proficient achievement of course learning outcomes. |
| 6 (Distinction) | 75 - 84 |
Demonstrated evidence of advanced achievement of course learning outcomes. |
| 7 (High Distinction) | 85 - 100 |
Demonstrated evidence of exceptional achievement of course learning outcomes. |
Additional course grading information
Grades will be allocated according to University-wide standards of criterion-based assessment.
Supplementary assessment
Supplementary assessment is available for this course.
Learning resources
You'll need the following resources to successfully complete the course. We've indicated below if you need a personal copy of the reading materials or your own item.
Library resources
Find the required and recommended resources for this course on the UQ Library website.
Learning activities
The learning activities for this course are outlined below. Learn more about the learning outcomes that apply to this course.
Filter activity type by
Please select
| Learning period | Activity type | Topic |
|---|---|---|
Week 1 |
Lecture |
Introduction to Derivatives Readings: Hull, Chapter 1 and 2. Learning outcomes: L01, L02, L03, L04 |
Week 2 |
Tutorial |
Introduction to Derivatives Learning outcomes: L01, L02, L03, L04 |
Lecture |
Forward and Futures Contracts 1 Guest speaker: UQ graduate to discuss transitioning from student to graduate in financial services and ongoing career opportunities. Readings: Hull, Chapter 3 and 5. Learning outcomes: L01, L02, L03, L04 |
|
Week 3 |
Tutorial |
Forward and Futures Contracts 1 Learning outcomes: L01, L02, L03, L04 |
Lecture |
Forward and Futures Contracts 2 Readings: Hull, Chapter 3 and 5. Learning outcomes: L01, L02, L03, L04 |
|
Week 4 |
Tutorial |
Forward and Futures Contracts 2 Please note that Wednesday 14 August is a public holiday. Students with a Wednesday tutorial are free to attend any other tutorial time this week. Learning outcomes: L01, L02, L03, L04 |
Lecture |
Introduction to Options Readings: Hull, Chapter 10 and 11. Learning outcomes: L01, L02, L03, L04 |
|
Week 5 |
Tutorial |
Introduction to Options Learning outcomes: L01, L02, L03, L04 |
Lecture |
The Black-Scholes Model and the Greeks Hull, Chapter 15 and 19. Learning outcomes: L01, L02, L03, L04 |
|
Week 6 |
Tutorial |
The Black-Scholes Model and the Greeks Learning outcomes: L01, L02, L03, L04 |
Lecture |
Implied Volatility and Trading Strategies Hull, Chapter 12 and 20 Learning outcomes: L01, L02, L03, L04 |
|
Week 7 |
Tutorial |
Implied Volatility and Trading Strategies Learning outcomes: L01, L02, L03, L04 |
Lecture |
Binomial Model and Monte Carlo Simulation Hull, Chapter 13 and 21.6. Learning outcomes: L01, L02, L03, L04 |
|
Week 8 |
Tutorial |
Binomial Model and Monte Carlo Simulation Learning outcomes: L01, L02, L03, L04 |
Lecture |
Pricing American and Path-Dependent Options Hull, Chapter 13.5, 21.6 and 26 Learning outcomes: L01, L02, L03, L04 |
|
Week 9 |
Tutorial |
Pricing American and Path-Dependent Options Learning outcomes: L01, L02, L03, L04 |
Lecture |
Interest Rate Derivatives: Futures, Options and Swaps 1 Hull, Chapter 4 (revision) and 6 Learning outcomes: L01, L02, L03, L04 |
|
Mid Sem break |
No student involvement (Breaks, information) |
In-Semester Break No lecture or tutorials during In-Semester break. |
Week 10 |
Tutorial |
Interest Rate Derivatives: Futures, Options and Swaps 1 Learning outcomes: L01, L02, L03, L04 |
Lecture |
Interest Rate Derivatives: Futures, Options and Swaps 2 Hull, Chapter 7, 21.1 and 21.2 Learning outcomes: L01, L02, L03, L04 |
|
Week 11 |
Tutorial |
Interest Rate Derivatives: Futures, Options and Swaps 2 Learning outcomes: L01, L02, L03, L04 |
Lecture |
Public holiday: No lecture Readings: Catch-up week. Learning outcomes: L01, L02, L03, L04 |
|
Week 12 |
Tutorial |
Catch-up tutorial Learning outcomes: L01, L02, L03, L04 |
Lecture |
Value at Risk (VaR) and Expected Shortfall (ES) Hull, Chapter 22. Learning outcomes: L01, L02, L03, L04 |
|
Week 13 |
Tutorial |
Value at Risk (VaR) and Expected Shortfall (ES) Learning outcomes: L01, L02, L03, L04 |
Lecture |
Revision Lecture Course review lecture. Learning outcomes: L01, L02, L03, L04 |
Policies and procedures
University policies and procedures apply to all aspects of student life. As a UQ student, you must comply with University-wide and program-specific requirements, including the:
- Student Code of Conduct Policy
- Student Integrity and Misconduct Policy and Procedure
- Assessment Procedure
- Examinations Procedure
- Reasonable Adjustments - Students Policy and Procedure
Learn more about UQ policies on my.UQ and the Policy and Procedure Library.