Course Outline

Course Title: Derivative Securities Instructor: Mr.

Hatim
Code: FIN 403
Semester ٍFall 09, Academic Year 2009-2010
Office Hours: SMW 2:30am-3:30pm E-Mail:
h_faris@alyamamah.edu.sa

Hours per week

Credit Contact Scheduled
Time
3 SUMTW
1:00pm-
2:05pm
Prerequisites:
Pl specify ( if Fin 201 Fin 302
any)

Course Description:
This course is an introductory course on derivative securities. These are securities whose
payoffs depend on the values of other underlying securities. We will focus mainly on
options, forward contracts and future contracts. We will study the organizations of their
markets, mechanics of trading, trading strategies, and most importantly, pricing models
for such securities.

Course Objectives:

1. Introduce the fundamental pricing relationships used to evaluate futures

and options.
2. to analyze the cost of carry relationship, put-call paity, the binomial and
the Black-Scholes option pricing models.
3. to examine how derivatives may be used by investment managers for
risking hedging purposes.
4. to expose students to the markets most recent developments, and to
identify the trends that are shaping the future of the derivatives industry.
Program trading, stock index arbitrage, exotic and weather derivatives will
be discussed.

Required Textbooks:

1. Hull, Fundamentals of Futures and Options Markets, 4th ed. Prentice-Hall 2001
2. Cuthbertson, Financial Engineering: Derivatives and Risk Management, Wiley
2001

Recommended Textbooks:

1. McDonald, Derivatives Markets, 1st ed. Addison Wesley 2003

Course Calendar:
Week No. Topics, Detailed Content Text book, assignments
1 Introduction Exchange- Chapter 1
traded markets, OTC
market. forward, future
contracts, options
2 -do- -do-
3 Mechanics of futures Chapter 2
markets. Forward vs.
future contracts

4 -do- -do-
Quiz #1 10%
5 Hedging strategies using Chapter 3
futures. Arguments for
and against hedging
6 -do- -do-
7 Interest rates Chapter 4

8 Determination of forward Chapter 5

and futures prices

First Exam 20%

9 Interest rate futures Chapter 6
10 Swaps Chapter 7

Second quiz 10%

11 Mechanics of option Chapter 8
markets
12 -do- -do-
13 Trading strategies using Chapter 10
options
14 -do- -do-
15 Review
16 Final exam 20%
….

Learning Outcomes
As determined by the Course In charge and relevant details would be discussed during
the semester etc

Learning -Teaching Strategies:

Group Discussions, Presentations, Lectures, Assignments

Evaluation Procedures
- Continuous Assessment Tasks 60% (Including quizzes, assignments,
projects ,
Case studies, presentations and any such
activities as determined by course In charge)
- Quiz #1 10%
- Exam 1 20%
- Quiz #2 10%
- Exam 2 20%
- Assignments 20%
- Class participation & attendance 20%

Instructional Materials
I. Books:

II. Research Publications, Magazines, Journals , ABI database and other resources
Available on Internet

Course Policies

1. Class Attendance: Students are expected to attend all classes of this course
(without exception). A prior approval is required for class absence except for
emergencies.

2. Tardy: Do not come late to class. Any student coming late will be marked late.
3. Exams
 Failure in attending a course exam will results in zero mark unless the student
provides an excuse acceptable to the Dean who approves a re-sit exam. It is your
responsibility to attend the exam at the correct time and place.

4. Assignments & Projects

Assignments and projects should be handed over on the due date. Zero mark will
follow late submission of an assignment unless the student has an acceptable
reason approved by the instructor.

5. Exam Attendance/Punctuality:
• In the event that a student is up to ten minutes late, he/she will be
permitted to attend/sit the exam. However, there will not be any extra time
allowances made in favor of this student.
• In the event that a student is more than 10 minutes late, he/she will not be
permitted to attend/sit the exam.

6.Cheating
Definition of cheating:
Cheating is an attempt to gain marks dishonestly and includes:
• Copying from another student’s work.
• Using materials not authorized by the instructor.
• Collaborating with another student during a test, without permission.
• Plagiarism which means presenting another person’s work or ideas as one’s own,
without attribution.

7. Penalty of Cheating:
The minimum penalty for cheating is an automatic Zero for the test or assignment
leading to a possible “F” for the subject. The student will be expelled from the
examination room so that he/she doesn’t disturb other students.

8. .Mobile phones are not allowed in the class.