FORE School of Management, New Delhi

Course Outline
Program: PGDM (FMG-30/IMG -15 /FM-04/BDA-02)

Name of the Course: Financial Derivatives Credit: 3.0

Faculty: Prof. Vikas Pandey/ Prof. Vandana Bhama Term: 4
Academic Year: 2022-23
Office Contact No.: 011-464855513; 011-46485507
Email: vikas.pandey@fsm.ac.in; vandana.bhama@fsm.ac.in
Introduction:
This course is designed to introduce the fundamentals of financial derivatives and about managing
risk through financial derivatives. This course introduces students to various types derivative
products and the crucial role they play for various market participants. The course provides tools
for managing various risks using financial derivative strategies. Derivatives allow businesses to
tailor the amount and kind of risk one takes. Risk could be related to changes in interest rates,
exchange rates, stock prices, commodity prices, inflation etc. Financial derivatives are used by
institutions as well as investors, to hedge unwanted risks and sometimes to even take on additional
risk, motivated by views regarding future market movements. Emphasis of this course will be on
identification of the sources of financial risks; measurement of risks and management of risks
using financial derivatives like futures, options, swaps et al.

Objectives:
After completing this course, students will be able to
 Understand various derivative products and their payoffs
 Know the role of financial derivatives in hedging, arbitrage, trading and investing
 Quantify financial risk and manage it using appropriate strategies
 Design key hedging strategies to manage the identified risks using popular derivative products

Text Book: John C. Hull, Fundamentals of Futures and Options Markets, 9th edition, Pearson,
2018. (Hereafter referred to as FFOM)

Reference Books:
 John C. Hull, Sankarsan Basu, Options, Futures and Other Derivatives, Pearson
Education
 Robert. W.Kolb and James. A. Overdahl, Futures, Options and Swaps, 5th Edition, Wiley
Blackwell

Pedagogy: The course will be taught through a mix of lectures, class discussions using live data
of stock exchange, case studies, excel based assignments using live data of NSE/BSE to stimulate
thinking, presentations and Industry guest sessions.

Evaluation Component and weightage: (an indicative evaluation component guideline is

attached)
Quiz -1 : 10
Quiz - 2 : 10
Project Presentation : 15
Class Participation : 05
Mid Term : 20
End Term : 40
________
Total 100 Marks
 Session Plan:

Session Additional Reading/ Question to

No. Session Theme Cases explore/Learning
outcome*
Introduction to Derivatives Chapter 1 of FFOM  Role of derivatives
Overview of Indian and International  How are derivatives
1 derivative markets different from Equity
 Derivative markets in
India
Introduction to financial forwards & Chapter 2 of FFOM  Understanding the
2 futures- Key concepts, features Excel based problems concepts of futures and
including trading, clearing & forwards and their role
settlement  Specification of
futures & forwards
 Operation of margin
account
 Understanding the
3 Determination of futures & forwards
Chapter 5 of pricing of futures and
Prices
FFOM forwards
Forward/Future price for an investment asset,
Excel based problems  Learning valuations
currencies and commodities
Forward Rate Agreements (FRA)  Determining the
Chapter 5 of
4 FRA Valuations valuations of forward
FFOM
rate agreements
Interest rate Derivatives
Chapter 4,6 of  Learning zero rates,
Zero rates, LIBOR,
5 FFOM interest rate futures
Interest rate futures
valuation and hedging
Chapter 5 of  Understanding live
FFOM trading in currency and
Commodity & Currency
6 Guest speaker session on commodity market
Futures
commodity and currency  Understanding
derivatives trading derivatives report.
 Learning strategies to
Hedging Strategies using futures Chapter 3 of hedge investments
7
Basis risk, cross hedging, stock index futures
FFOM using futures

 Learning futures
Hedging Strategies using futures Case study – Single stock
8 strategies using a
Caselet futures –HBPS
practical scenario
9 Mechanics of Option Markets Chapter 9 of FFOM
Types of Options  Understanding the
Underlying Assets options and their
Specification of Stock Options payoffs
Trading-Commissions Margins
Properties of Stock Options  Understanding the
Upper and Lower bounds for Chapter 10 of nature of options
10
Option prices; FFOM
Put –Call parity
 Mid Term Examination
Chapter 11 of  Developing required
Trading Strategies involving options
11-12 FFOM trading strategies using
Spreads-Combinations-Other Payoff
Excel exercises using live data options
Option pricing models-  Understanding
Chapter 12,13
13-14  Binomial Trees Pricing/valuation
of FFOM
 Black-Scholes-Merton Model models of options
Options Greeks  Option Greeks and
Chapter 17 of
15 Delta hedging Delta hedging
FFOM
Gamma, Theta, Vega and Rho strategies
 Understanding
Volatility Smiles & VaR
Chapter 19,20 volatility hedge
16 Relevance of volatility smiles
Value at Risk introduction
of FFOM  Estimation of value at
risk
 Learning the
Case Study – Parliamentary
Analysis of overall strategies of futures and
significance of key
17 options using a caselet election impact on Indian
strategies in futures
Capital Markets - IVEY
and options
 Financial derivatives
for other financial
Swaps
Chapter 7 of asset classes
18-19 Mechanics of Interest rate swaps, cross
FFOM  Interest rate and
currency swaps, Credit Derivatives
currency swaps for
interest cost cutting
20 Class Presentations

For official use: -

As Benchmarked with course content in previous year, the contents of this course: (Please mark
the right option below)
(a) Is totally new
(b) Has not changed at all
(c) Has undergone less than/equal to 20% change

(d) Has undergone more than 20% change

Faculty - Prof. Vikas Pandey/ Prof. Vandana Bhama

Area Chair – Prof. Vandana Gupta

Manager (Academics-I) Dean (Academics)