UCL - Produits dérivés

[LSMS2015]

[30h] 5 credits

This course is taught in the 1st semester.

Teacher(s): Michel Levasseur

Language: French

Level: Second

Aims
Main themes
Content and teaching methods
Other information (prerequisite, evaluation (assessment methods), course materials recommended readings, ...)

Aims

The objective of the class is twofold. It is about:
a) systemizing and enhancing students' knowledge in financial derivatives: characteristics of financial contracts (traded on organized markets) and uses for hedging purposes;
b) motivating students for reading of documents published by the professional organizations in order to prepare professionals able to join specialized departments within banks;

Main themes

The futures markets, the term structure of prices and hedging
The options markets, hedging and use of the " Greeks "

Content and teaching methods

The first part of this course is devoted to the study of forward and futures contracts. At the beginning of these markets, only commodities were concerned (more especially agricultural products). We shall to study these contracts. Later, we shall have a careful look at the interets rate related contracts that are now the most active ones. The second part of the course is devoted to the options markets. They were introduced at the beginning of the seventies and concerned the common shares. The ways they are managed, their uses et the rules of an efficient portfolio management will be treated.

1 Commodities futures markets : principles and organization
the pit and the transations
the clearing
the delivery process
the speculation

2 The futures prices and the dynamic management of a portfolio
backwardation, contango and basis
the efficiency of a hedge
futures markets and storage policy
the arbitrage

3 The basic uses of " notional futures "
hedging in the context of rising interest rates
hedging in the context of declining interest rates
basis and efficiency of hedging
cash and carry
reverse
cross hedging

4 The dynamic management of notional futures contacts
the characteristics of a notional contract
the factor and the " cheapest "
computing the hedge ratio with the duration measures
computing the hedge ratio with the correlation measures

5 The futures contracts on short term interest rates
the characteristics of the indices (IMM E$ 3months, EURIBOR 3 months,...)
the cash settlement
hedging interest rates charges
hedging financial incomes
the methods : strip hedge, rolling strip hedge, one-off hedge, ...

6 The basic uses of options on stocks
the characteristics of the contracts
bullish uses, bearish uses, speculation on volatility
hedging
arbitrage and conversion

7 The parity relationships
put - call spot parity
put - call forward parity

8 The dynamic management of an option portfolio
use of the Black and Scholes model
the greeks : delta, gamma, theta, vega
the delta neutral positions
the top and bottom positions

9 Introduction on exotic options
forward start options
chooser options
barrier options
lookback options
average options

Content
The case for innovation
Innovation concepts
Case studies
Innovation financing
Innovation management processes

Methods
In-class activities
X Lectures
X Exercices
At home activities

X Readings to prepare the lecture
X Exercices to prepare the lecture
X Paper work

Other information (prerequisite, evaluation (assessment methods), course materials recommended readings, ...)

Prerequisites (ideally in terms of competiencies)
Evaluation : Class participation and oral examination, in French or English
Support : Slides provided through icampus
References : Provided during the class

Internationalisation
X international content (markets arse highly standardized and spread on all the world)

Corporate features
Skills
X writing skills
X team work
X individual autonomy
X critical thinking

Techniques and tools for teaching and learning
X IT tools
X Internet work
X modelling
X quantitative methods