National University




FIN653 Fin. Engineering & Derivatives

Lead Faculty: Dr. Gurdeep Kumar Chawla

Course Description

This course provides an introduction to futures and options markets and outlines the different ways in which they can be used. It covers futures and forward contracts, pricing of forward and futures, hedging techniques, swaps, options markets, trading strategies, option pricing models, volatility smiles, and a detailed treatment of hedge parameters such as delta, gamma, and vega. Also discussed is portfolio insurance, value-at-risk measure, multi-step binomial trees to value American options, interest rate options, and other exotic options.

Learning Outcomes

  • Define, discuss, and analyze present futures, forward, and options markets.
  • Compare and contrast the pricing models of futures, forwards, and options.
  • Compare and contrast various ways in which a company can take a position in futures and options contracts to offset an exposure to the price of an asset.
  • Compare and contrast the two most common types of swaps such as interest rate swaps and currency swaps.
  • Analyze six factors affecting the value of a stock option: the current stock price, the strike price, the expiration date, the stock price volatility, the risk-free interest rate, and the dividends expected during the life of the option.
  • Discuss, compare and contrast various trading strategies involving options.
  • Compare and contrast stock options, futures option, and other exotic options, including credit derivatives, weather derivatives, energy derivatives, and insurance derivatives.
  • Discuss derivatives disasters and review the lessons learned from them.