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 FINM1001. FINM2002 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 such as weather and electricity derivatives. The models used for pricing these instruments will be covered as well as techniques used for risk management. 

Learning Outcomes

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

1. Articulate options, futures, forwards, and swaps on a range of underlying assets/commodities.
2. Explain and be able to utilise option trading strategies.
3. Critically analyse the types of assets/commodities used including stocks, interest rates, foreign exchange as well as exotic instruments and weather and electricity derivatives.
4. Use various models to price forward, futures, swap and option contracts.
5. Use these pricing models for risk management.
6. Collect, process, interpret and communicate the outcomes of 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

Please see the Wattle course site for information on examination material, which will be released by the end of week 10 (for the final examination).

Required Resources

No required textbook.

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). Further, an e-book version of this text is available at:

https://ebookcentral.proquest.com/lib/anu/detail.action?docID=5220612

Students are required to read the CFA Code of Ethics and Standards of Professional Conduct Standard IV: Duties to Employers. This content will be discussed in Lecture 11. This document can be found at:

https://www.cfainstitute.org/-/media/documents/code/code-ethics-standards/standards-practice-handbook-12th-edition.pdf

Staff Feedback

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

• written comments
• verbal comments
• feedback to whole class, groups, individuals, focus group etc

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). Feedback can also be provided to Course Conveners and teachers via the Student Experience of Learning & Teaching (SELT) feedback program. SELT surveys are confidential and also provide the Colleges and ANU Executive with opportunities to recognise excellent teaching, and opportunities for improvement.

Other Information

Scaling

You 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 formulate, 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 result in a score that is either higher or lower than the raw mark calculated.

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 lecturer and tutor(s) for this course will contact students on their official ANU student email address. Information about your enrollment 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.

Assessment Requirements

As a further academic integrity control, students may be selected for a 15 minutes individual oral examination of their written assessment submissions.

Any student identified, either during the current semester or in retrospect, as having used ghost-writing services will be investigated under the University's Academic Misconduct Rule.

Class Schedule

Week/Session	Summary of Activities	Assessment
1	Topic: Course Overview and Extended Analysis of Forwards, Futures and Options ContractsReadings: Lecture Notes 1, Hull et al Ch. 1 & 2
2	Topic: Hedging Strategies Using FuturesReadings: Lecture Notes 2, Hull et al Ch. 3 & 5	Tutorial 1 Questions
3	Topic: Interest Rate Contracts and SwapsReadings: Lecture Notes 3, Hull et al Ch. 4 & 7	Tutorial 2 QuestionsQuiz 1
4	Topic: Options and Options Trading StrategiesReadings: Lecture Notes 4, Hull et al Ch. 9, 10 & 11	Tutorial 3 QuestionsQuiz 2
5	Topic: Binomial Model for Pricing OptionsReadings: Lecture Notes 5, Hull et al Ch. 12	Tutorial 4 QuestionsQuiz 3
6	Topic: Black-Scholes Model for Pricing OptionsReadings: Lecture Notes 6, Hull et al Ch. 13	Tutorial 5 Questions
7	Topic: Index and Foreign Exchange OptionsReadings: Lecture Notes 7, Hull et al Ch. 15	Tutorial 6 Questions
8	Topic: Options on Futures ContractsReadings: Lecture Notes 8, Hull et al Ch. 16	Tutorial 7 Questions
9	Topic: The Greek LettersReadings: Lecture Notes 9, Hull et al Ch. 17	Tutorial 8 QuestionsQuiz 4
10	Topic: Exotic Options and other Non-standard ProductsReadings: Lecture Notes 10, Hull et al Ch. 22	Tutorial 9 Questions
11	Topic: Credit, Weather, Energy and Insurance Derivatives and Derivatives Mishaps and Ethics in Risk ManagementReadings: Lecture Notes 11, Hull et al Ch. 23, 24 & 25CFA Code of Ethics and Standards of Professional Conduct Standard IV: Duties to Employers.	Tutorial 10 QuestionsQuiz 5
12	Topic: Application of Derivatives and Course ReviewReadings: Lecture Notes 12	Tutorial 11 Questions

Tutorial Registration

Tutorials commence in Week 2 of the semester and will be held on campus. ANU utilises MyTimetable to enable students to view the timetable for their enrolled courses, browse, then self-allocate to small teaching activities / tutorials so they can better plan their time. Find out more on the Timetable webpage (https://www.anu.edu.au/students/program-administration/timetabling).

Assessment Summary

Assessment task	Value	Due Date	Return of assessment	Learning Outcomes
In-Tutorial Quiz 1	7 %	05/08/2024	16/08/2024	1,2,3,4,5,6
In-Tutorial Quiz 2	7 %	12/08/2024	23/08/2024	1,2,3,4,5,6
In-Tutorial Quiz 3	7 %	19/08/2024	30/08/2024	1,2,3,4,5,6
In-Tutorial Quiz 4	7 %	30/09/2024	11/10/2024	1,2,3,4,5,6
In-Tutorial Quiz 5	7 %	14/10/2024	25/10/2024	1,2,3,4,5,6
Final Examination	65 %	31/10/2024	28/11/2024	1,2,3,4,5,6

* 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 Integrity Rule before the commencement of their course. Other key policies and guidelines include:

• Academic Integrity Policy and Procedure
• Student Assessment (Coursework) Policy and Procedure
• Extenuating Circumstances Application
• Student Surveys and Evaluations
• Deferred Examinations
• Student Complaint Resolution Policy and Procedure
• Code of practice for teaching and learning

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 Academic Skills 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.

Participation

Course content delivery will take the form of weekly on-campus lectures (recorded and available via echo360 on Wattle), weekly on-campus workshops (recorded and available via echo360 on Wattle) and weekly on-campus tutorials (not recorded). Weekly consultations with the lecturer and the tutor(s) can be conducted in-person or over Zoom. If conducted over Zoom, a Zoom link will be provided on Wattle.

Examination(s)

The final examination will be on campus in person, is centrally scheduled through Examinations, and will be timetabled prior to the examination period (please check ANU Timetabling for further information). Please see the Wattle course site for information on examination material, which will be released by the end of week 10 for the final examination.

Assessment Task 1

In-Tutorial Quiz 1

Students will be required to sit 5 in-tutorial quizzes throughout the semester, each worth 7%.

· These quizzes will be run according to the schedule in the "Class Structure and Content" section of this summary (unless otherwise stated by the lecturer).

· Each quiz is worth 7% and will be redeemable against the final exam, and will therefore count towards either 0% or 7% of a student's overall course grade (this will be calculated automatically to the benefit of the student).

· The quizzes are closed book.

· The quizzes will be 10 – 15 minutes in duration and held at the end of the tutorial.

· Students MUST sit the quiz in the tutorial they are enrolled in, otherwise the quiz will not count.

· The content for the quizzes will be limited to the required material for the topic on which the tutorial is held (the previous week’s lecture and workshop material).

· Students will receive their marked quizzes back in the tutorial the following week.

· The quiz solutions will be discussed at the start of the lecture the following week.

· This assessment task needs to be completed in pen (NOT PENCIL).

· Students will require the use of their non-programmable scientific calculator to complete the quiz.

Note: Students are required to prepare worked solutions to tutorial questions, bring these solutions to tutorials, and be prepared to participate in tutorial discussions. This is an important step in preparing for the tutorial quizzes.

Assessment Task 2

In-Tutorial Quiz 2

Please see instructions for Assessment task 1 "In-Tutorial Quiz 1"

Assessment Task 3

In-Tutorial Quiz 3

Please see instructions for Assessment task 1 "In-Tutorial Quiz 1"

Assessment Task 4

In-Tutorial Quiz 4

Please see instructions for Assessment task 1 "In-Tutorial Quiz 1"

Assessment Task 5

In-Tutorial Quiz 5

Please see instructions for Assessment task 1 "In-Tutorial Quiz 1"

Assessment Task 6

Final Examination

The final examination will be closed-book and based on all the work covered throughout the duration of the semester. The final examination is worth 65% (up to a maximum of 100% depending on whether some or all of the quiz marks are redeemed) of the overall course grade. The exam will be held on campus in person. The exam will include a mixture of theoretical and numerical questions. Students will be provided with further details regarding the exam by the end of week 10. This assessment task needs to be completed in pen (NOT PENCIL). Students will require the use of their non-programmable scientific calculator to complete the exam. The final exam is centrally scheduled through Examinations, and will be timetabled prior to the examination period (please check ANU Timetabling for further information). Exam scripts will not be returned. The due date references the start of the exam period, with the final exam date still to be determined.

Academic Integrity

Academic integrity is a core part of the ANU culture as a community of scholars. The University’s students are an integral part of that community. The academic integrity principle commits all students to engage in academic work in ways that are consistent with, and actively support, academic integrity, and to uphold this commitment by behaving honestly, responsibly and ethically, and with respect and fairness, in scholarly practice.

The University expects all staff and students to be familiar with the academic integrity principle, the Academic Integrity Rule 2021, the Policy: Student Academic Integrity and Procedure: Student Academic Integrity, and to uphold high standards of academic integrity to ensure the quality and value of our qualifications.

The Academic Integrity Rule 2021 is a legal document that the University uses to promote academic integrity, and manage breaches of the academic integrity principle. The Policy and Procedure support the Rule by outlining overarching principles, responsibilities and processes. The Academic Integrity Rule 2021 commences on 1 December 2021 and applies to courses commencing on or after that date, as well as to research conduct occurring on or after that date. Prior to this, the Academic Misconduct Rule 2015 applies.

 

The University commits to assisting all students to understand how to engage in academic work in ways that are consistent with, and actively support academic integrity. All coursework students must complete the online Academic Integrity Module (Epigeum), and Higher Degree Research (HDR) students are required to complete research integrity training. The Academic Integrity website provides information about services available to assist students with their assignments, examinations and other learning activities, as well as understanding and upholding academic integrity.

Online Submission

There are no online submissions in this course.

Hardcopy Submission

There are no hardcopy submissions in this course.

Late Submission

No submission of assessment tasks without an extension after the due date will be permitted. If an assessment task is not submitted by the due date, a mark of 0 will be awarded.

Referencing Requirements

The Academic Skills website has information to assist you with your writing and assessments. The website includes information about Academic Integrity including referencing requirements for different disciplines. There is also information on Plagiarism and different ways to use source material. Any use of artificial intelligence must be properly referenced. Failure to properly cite use of Generative AI will be considered a breach of academic integrity.

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.

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 Access 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 all ANU students