This unit is designed to further students’ understanding of futures and options contracts and their use in managing risk. It builds upon material covered in FINM7006 and STAT7055. FINM7041 provides an overview of options, futures, forwards and swaps on a range of underlying assets/commodities including stocks, interest rates, foreign exchange as well as more exotic instruments. The models used for pricing these instruments will be examined as well as techniques used for risk management.

Learning Outcomes

Upon successful completion, students will have the knowledge and skills to:

1. Explain in detail how options, futures, forwards, and swaps can be used on a range of underlying assets/commodities;
2. Demonstrate the appropriate use of option trading strategies;
3. Demonstrate the use of derivatives for a range of assets/commodities including stocks, interest rates, foreign exchange as well as exotic instruments and weather and electricity derivatives;
4. Explain in detail and be able to demonstrate various models to price forward, futures, swap and option contracts;
5. Use these pricing models for risk management; and,
6. Collect, process, interpret and communicate the outcomes of complex financial problems.

Research-Led Teaching

Students undertaking this course will be taught fundamental skills in Finance that will be applied to many real life applications. Students will also be shown how these techniques are applied to research today.

Additional Course Costs

The only additional course costs are a non-programmable scientific calculator (not a financial calculator!)

Examination Material or equipment

The only permitted materials in the examination are a calculator (scientific, non-programmable and not a financial calculator), dictionary (which will be checked at the examination), pen and ruler.

Required Resources

 

Recommended Resources

Recommended textbook

Hull, J., Treepongkaruna, S., Heaney, R., Pitt, D., and D. Colwell, Fundamentals of futures and options markets, 1st adaption, Pearson Education 2014.  (i.e., The textbook readings are optional for this course. In addition, this textbook is available to students as a 2 hour or 2 day loan from ANU library).

Students are required to read pages 125-153 of the CFA Standards of Practice Handbook, Standard IV: Duties to Employers. This content will be discussed in Lecture 1. This document can be found at:

https://www.cfainstitute.org/en/ethics/codes/standards-practice-handbook

Staff Feedback

Students will be given feedback in the following forms in this course:

·        in tutorials through interactions with tutors and discussions with other students;

·        through assessments where tutors will provide specific feedback;

·        through consulting teaching staff during their consultation time.

Student Feedback

ANU is committed to the demonstration of educational excellence and regularly seeks feedback from students. Students are encouraged to offer feedback directly to their Course Convener or through their College and Course representatives (if applicable). The feedback given in these surveys is anonymous and provides the Colleges, University Education Committee and Academic Board with opportunities to recognise excellent teaching, and opportunities for improvement. The Surveys and Evaluation website provides more information on student surveys at ANU and reports on the feedback provided on ANU courses.

Other Information

Scaling

Your final mark for the course will be based on the raw marks allocated for each of your assessment items. However, your final mark may not be the same number as produced by that formula, as marks may be scaled. Any scaling applied will preserve the rank order of raw marks (i.e. if your raw mark exceeds that of another student, then your scaled mark will exceed or be the same as the scaled mark of that student), and may be either up or down

Support for Students

The University offers a number of support services for students. Information on these is available online from http://students.anu.edu.au/studentlife/

Communication

If necessary, the lecturers and tutors for this course will contact students on their official ANU student email address. Information about your enrolment and fees from the Registrar and Student Services' office will also be sent to this email address. Students are expected to check the Wattle site for announcements about this course, e.g. changes to timetables or notifications of cancellations. Notifications of emergency cancellations of lectures or tutorials will be posted on the door of the relevant room.

Class Schedule

Week/Session	Summary of Activities	Assessment
1	Topic: Course Overview and Extended Analysis of Forwards, Futures and Options Contracts Readings: Lecture Notes 1, Hull et al Ch. 1 & 2
2	Topic: Hedging Strategies Using Futures Readings: Lecture Notes 2, Hull et al Ch. 3 & 5	Tutorial 1 Questions
3	Topic: Interest Rate Contracts and Swaps Readings: Lecture Notes 3, Hull et al Ch. 4 & 7	Tutorial 2 Questions Quiz 1
4	Topic: Options and Options Trading Strategies Readings: Lecture Notes 4, Hull et al Ch. 9, 10 & 11	Tutorial 3 Questions Quiz 2
5	Topic: Binomial Model for Pricing Options Readings: Lecture Notes 5, Hull et al Ch. 12	Tutorial 4 Questions
6	Topic: Black-Scholes Model for Pricing Options Readings: Lecture Notes 6, Hull et al Ch. 13	Tutorial 5 Questions
7	Topic: Index and Foreign Exchange Options Readings: Lecture Notes 7, Hull et al Ch. 15	Tutorial 6 Questions
8	Topic: Options on Futures Contracts Readings: Lecture Notes 8, Hull et al Ch. 16	Tutorial 7 Questions Quiz 3
9	Topic: The Greek Letters Readings: Lecture Notes 9, Hull et al Ch. 17	Tutorial 8 Questions Quiz 4
10	Topic: Exotic Options and other Non-standard Products Readings: Lecture Notes 10, Hull et al Ch. 22	Tutorial 9 Questions Quiz 5
11	Topic: Credit, Weather, Energy and Insurance Derivatives and Derivatives Mishaps and Ethics in Risk Management Readings: Lecture Notes 11, Hull et al Ch. 23, 24 & 25 CFA Standards of Practice Handbook, Standard IV: Duties to Employers. pgs. 105-126	Tutorial 10 Questions Quiz 6
12	Topic: Review Readings: Lecture Notes 12	Tutorial 11 Questions

Tutorial Registration

Please see Wattle for tutor's information. Tutorial signup for this course will be done via the Wattle website. Detailed information about signup times will be provided on Wattle or during your first lecture. When tutorials are available for enrolment, follow these steps:

1.     Log on to Wattle, and go to the course site

2.     Click on the link “Tutorial enrolment”

3.     On the right of the screen, click on the tab “Become Member of…..” for the tutorial class you wish to enter

4.     Confirm your choice

If you need to change your enrolment, you will be able to do so by clicking on the tab “Leave group….” and then re-enrol in another group. You will not be able to enrol in groups that have reached their maximum number. Please note that enrolment in ISIS must be finalised for you to have access to Wattle.

Assessment Summary

Assessment task	Value	Due Date	Return of assessment	Learning Outcomes
In-Tutorial Quizzes	15 %	09/03/2020	16/03/2020	1-5
Mid-Semester Exam	25 %	20/04/2020	15/05/2020	1,2
Final Examination	60 %	01/06/2020	03/07/2020	1-5

* If the Due Date and Return of Assessment date are blank, see the Assessment Tab for specific Assessment Task details

Policies

ANU has educational policies, procedures and guidelines, which are designed to ensure that staff and students are aware of the University’s academic standards, and implement them. Students are expected to have read the Academic Misconduct Rule before the commencement of their course. Other key policies and guidelines include:

• Student Assessment (Coursework) Policy and Procedure
• Special Assessment Consideration Policy and General Information 
• Student Surveys and Evaluations
• Deferred Examinations
• Student Complaint Resolution Policy and Procedure

Assessment Requirements

The ANU is using Turnitin to enhance student citation and referencing techniques, and to assess assignment submissions as a component of the University's approach to managing Academic Integrity. For additional information regarding Turnitin please visit the ANU Online website. In rare cases where online submission using Turnitin software is not technically possible; or where not using Turnitin software has been justified by the Course Convener and approved by the Associate Dean (Education) on the basis of the teaching model being employed; students shall submit assessment online via ‘Wattle’ outside of Turnitin, or failing that in hard copy, or through a combination of submission methods as approved by the Associate Dean (Education). The submission method is detailed below.

Moderation of Assessment

Marks that are allocated during Semester are to be considered provisional until formalised by the College examiners meeting at the end of each Semester. If appropriate, some moderation of marks might be applied prior to final results being released.

Examination(s)

Centrally administered examinations through Examinations, Graduations & Prizes will be timetabled prior to the examination period. Please check ANU Timetabling for further information. Further information about the examination will be provided in class and on Wattle closer to the time of the examination.

Assessment Task 1

In-Tutorial Quizzes

• 6 quizzes will be held within tutorials on the weeks specified in this outline.

• The quizzes will be 10 – 15 minutes in duration, at the end of the tutorial.

• Students are required to prepare worked solutions to tutorial questions, bring these solutions to tutorials, and be prepared to participate in tutorial discussions

• Students will be required to sit 6 in-tutorial quizzes throughout the semester.

• Students MUST sit the quiz in the tutorial they are enrolled in; otherwise the quiz will not count.

• These quizzes will be run according to the schedule specified in this outline (unless otherwise stated by the lecturer).

• The content for the quizzes will be limited to the required material for the tutorial in which it’s held.

• Students’ best 5 marks will count towards 15% of their overall course grade.

• Students should receive their quizzes back one week after the quiz is held.

Assessment Task 2

Mid-Semester Exam

• This exam is optional and redeemable for students.

• It is a closed book exam for 2 hours, with no formula sheet provided.

• The questions will be a mixture of theory and practical questions.

• Students will need to review and revise all material covered prior to the week of the mid-semester exam, and corresponding tutorials.

• The exam will be held in approximately week 7. The precise date and week is centrally scheduled by ANU Examinations.

This is a centrally administered examination. Please check ANU Timetabling for further information. Further information about the examination will be provided in class and on Wattle closer to the time of the examination (by Week 5 or as soon as ANU Timetabling releases the information).

Assessment Task 3

Final Examination

The final examination will be based on all the work covered throughout the duration of the semester. The final examination is worth 60% of the overall course grade. The exam will be 3 hours and include a mixture of theoretical and numerical questions. Students will be provided with further details regarding the exam as it approaches.

This is a centrally administered examination. Please check ANU Timetabling for further information. Further information about the examination will be provided in class and on Wattle closer to the time of the examination (by Week 11 or as soon as ANU Timetabling releases the information).

Academic Integrity

Academic integrity is a core part of the ANU culture as a community of scholars. At its heart, academic integrity is about behaving ethically, committing to honest and responsible scholarly practice and upholding these values with respect and fairness.

The ANU commits to assisting all members of our community to understand how to engage in academic work in ways that are consistent with, and actively support academic integrity. The ANU expects staff and students to be familiar with the academic integrity principle and Academic Misconduct Rule, uphold high standards of academic integrity and act ethically and honestly, to ensure the quality and value of the qualification that you will graduate with.

The Academic Misconduct Rule is in place to promote academic integrity and manage academic misconduct. Very minor breaches of the academic integrity principle may result in a reduction of marks of up to 10% of the total marks available for the assessment. The ANU offers a number of online and in person services to assist students with their assignments, examinations, and other learning activities. Visit the Academic Skills website for more information about academic integrity, your responsibilities and for assistance with your assignments, writing skills and study.

Online Submission

N/A

Hardcopy Submission

N/A

Late Submission

N/A

Referencing Requirements

Accepted academic practice for referencing sources that you use in presentations can be found via the links on the Wattle site, under the file named “ANU and College Policies, Program Information, Student Support Services and Assessment”. Alternatively, you can seek help through the Students Learning Development website.

Returning Assignments

N/A

Extensions and Penalties

Extensions and late submission of assessment pieces are covered by the Student Assessment (Coursework) Policy and Procedure. Extensions may be granted for assessment pieces that are not examinations or take-home examinations. If you need an extension, you must request an extension in writing on or before the due date. If you have documented and appropriate medical evidence that demonstrates you were not able to request an extension on or before the due date, you may be able to request it after the due date.

Resubmission of Assignments

N/A

Privacy Notice

The ANU has made a number of third party, online, databases available for students to use. Use of each online database is conditional on student end users first agreeing to the database licensor’s terms of service and/or privacy policy. Students should read these carefully. In some cases student end users will be required to register an account with the database licensor and submit personal information, including their: first name; last name; ANU email address; and other information.
In cases where student end users are asked to submit ‘content’ to a database, such as an assignment or short answers, the database licensor may only use the student’s ‘content’ in accordance with the terms of service – including any (copyright) licence the student grants to the database licensor. Any personal information or content a student submits may be stored by the licensor, potentially offshore, and will be used to process the database service in accordance with the licensors terms of service and/or privacy policy.
If any student chooses not to agree to the database licensor’s terms of service or privacy policy, the student will not be able to access and use the database. In these circumstances students should contact their lecturer to enquire about alternative arrangements that are available.

Distribution of grades policy

Academic Quality Assurance Committee monitors the performance of students, including attrition, further study and employment rates and grade distribution, and College reports on quality assurance processes for assessment activities, including alignment with national and international disciplinary and interdisciplinary standards, as well as qualification type learning outcomes.

Since first semester 1994, ANU uses a grading scale for all courses. This grading scale is used by all academic areas of the University.

Support for students

The University offers students support through several different services. You may contact the services listed below directly or seek advice from your Course Convener, Student Administrators, or your College and Course representatives (if applicable).

• ANU Health, safety & wellbeing for medical services, counselling, mental health and spiritual support
• ANU Diversity and inclusion for students with a disability or ongoing or chronic illness
• ANU Dean of Students for confidential, impartial advice and help to resolve problems between students and the academic or administrative areas of the University
• ANU Academic Skills and Learning Centre supports you make your own decisions about how you learn and manage your workload.
• ANU Counselling Centre promotes, supports and enhances mental health and wellbeing within the University student community.
• ANUSA supports and represents undergraduate and ANU College students
• PARSA supports and represents postgraduate and research students