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Distributed by Nanyang Business School, Nanyang Technological University. All Rights Reserved.

BF2209 Derivative Securities

_________________________________________________________________________ Course Description and Scope The course should provide students with the knowledge of (1) the use of derivatives for trading, investment and risk management purposes; (2) the relative cost/benefit of these strategies; (3) the key derivative pricing principles and theories. This course focuses on currency and share as the underlying assets, except for interest rate swap and credit default swap. Course Learning Objective Students will learn how to use derivatives for investment and risk management purposes and how to price derivatives in the market. Students will also learn basic trading and arbitrage strategies using derivatives and their underlying assets. Course Assessments

Components Marks Individual/Group

Class participation/Project/Quiz 30% Individual/Group

Examination * 70% Individual

Total 100 * The final examination is a restricted open-book exam; students may bring one A4-size sheet of paper with information on mathematical formulas, computation steps, etc., into the exam hall. Textbook

CB Don M. Chance and Robert Brooks An Introduction to Derivatives & Risk Management, 9th Edition Thomson and South Western, 2013 (Call No.: HG6024.A3C454a 2013)

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Distributed by Nanyang Business School, Nanyang Technological University. All Rights Reserved.

Proposed Weekly Schedule

Readings Topic

1. 2. & 8. Introduction to Derivatives

3. Principles of Option Pricing

4. Binomial Option Pricing

5. Black-Scholes- Merton Option Pricing

6. & 7. Use of options for trading, investment and risk management purposes

9. & 10. Pricing Forwards, Futures & Options on Futures

11. Hedging with Forward & Futures

12. Swaps

TBA. Credit Derivatives