FIN202 - DERIVATIVES

Unit Guide

Trimester 3 2022-2023
 FIN202_DERIVATIVES

TRIMESTER 3 2022-2023

About Derivatives (FIN202)

CONTACTS
Unit Instructor / Main
Lecturer
Associate Lecturer
Program Administrator
Dr. Tran Minh Hoang
Email: hoang.tran@isb.edu.vn
Ms. Linh Vu
Email: linh.vu@isb.edu.vn
An Nguyen
279 Nguyen Tri Phuong Street, District 10, HCM City
Phone: Email: an.nguyen@isb.edu.vn

UNIT OVERVIEW

This subject covers derivative markets and derivative securities. It discusses pricing, risk
management and regulatory aspects of derivative securities. Topics include forwards and futures
markets, options markets, arbitrage and trading securities, basic pricing concepts, the cost-of-carry
model, the Black-Scholes model, hedging and risk management techniques, interest rate swaps and
real options.

PRE-REQUISITES

Mathematics for Business

Statistics for Business
Corporate Finance

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Assessment Information

UNIT LEARNING OUTCOMES

The table below outlines the unit learning outcomes (ULOs) for this unit. Upon completion
of this unit, students will be able to:

1. Describe the operational mechanics of derivatives trading;

2. Explain factors affecting the pricing of forward and futures contracts;

3. Explain the trading and hedging strategies using futures and options;

4. Use the Binomial and Black-Scholes-Merton models for option pricing;

5. Explain the concepts of real options and their applications in project valuations.

PROGRAM LEARNING OUTCOMES

In line with its focus on assuring students’ skills in unit learning outcomes 1-7 above, this
unit is also responsible for introducing/developing/assuring the following program-level
learning outcomes (PLOs):

Knowledge & Application

1. Solid understanding and competency of appropriate application of business discipline-
specific knowledge.
Communication
2. Competency in professional written and oral communication suited to multiple audiences
and contexts.
Teamwork
3.
Effective collaboration in teamwork or other tasks in organizational settings.
Critical thinking
4.
Critical thinking through appropriate observing, analyzing and reasoning, etc.
Problem solving
5.
Effective and constructive problem solving.
Ethics
6. An ethical perspective, including an understanding of the ethical responsibilities of
organizations.
Cultural Diversity
A global mindset, including an understanding of the different business settings, the ability to
7. identify foreign market potentials, to diagnose cross-cultural communication problems and
propose appropriate solutions.

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ASSESSMENT SUMMARY

VALUE
ASSESSMENT ITEM DUE DATE LEARNING OUTCOMES
(%)
See the
1. Group exercises + In-class tests Teaching 20% LO1-LO5
Schedule
2. Mid-term examination TBA 20% LO1-LO5
3. Group Project TBA 20% LO1-LO5
4. Final examination TBA 40% LO1-LO5

Final marks and grades are subject to confirmation by the School Assessment Committees
which may scale, modify, or otherwise amend the marks and grades for the unit, as may be
required by university policies.
 Note: To successfully complete this unit, students must:
 Achieve a minimum of 50 marks;
 Complete all assessment items; and
 Attend 80 per cent of class time. See attendance requirements in the section of class
policies and rules below.

Assessment 1: Group exercises (Group) + In-class test

(Individual) (20%)
Due: See the Teaching Schedule
Length: See the Teaching Schedule
 After every session, students are assigned a certain number of homework
questions and must prepare them before going to the class. In details, students will
work in group to finish the homework and submit the file on E-learning by the
due date (8am Friday morning for class 1 and 11:00 am Friday afternoon for
class 2)

 Group of students who submit their homework by the due date will receive the
credit for that session towards their assessment grade for the subject. Group of
students who fail to submit their homework by the due date or who submit it
after the due date shall receive no credit for that session towards their
assessment grade for the subject. Group of students who fail to submit any
homework attempts by the appropriate due date during the trimester shall
receive an automatic Fail Non-Submission grade for the subject

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 Also, a group will be called randomly to present their homework results to the class.
The grade will be given depend on the group’s comprehension of assigned
materials, presentation skill, and teamwork. In case if there is any unequal
allocation of works, kindly attach the percentage of contribution from each member
in the submitted file.

 At the end of the class, students are required to complete a small test (MCQ), in
order for the lecturer to evaluate students’ performance individually. This worths
10% of the assessment grade

Marking criteria and standards

In-class presentations will contribute up to 10% of your final marks.

End-of-class test will contribute the remaining 10% of this assessment.

Assessment 2: Mid-term exam (Individual) (20%)

Due: TBA
Length: 90 minutes

 Online multiple-choice test that will be machine marked. Attempting the exam is
compulsory. Failure to attempt the exam during the period that it is available will
result in a Failure Non-Submission grade being awarded for the subject. The exam
will cover all material from weeks 1- the week of session 9 of the subject.

 Students are to attempt the online multiple-choice exam (with a proctor) on a pre-
confirmed date after session 10. Students will have one attempt only to complete
the exam. On-site multiple-choice test that will be machine marked. A formula sheet
will be provided.

 Closed-book exam. No materials are to be brought into the examination venue.

Assessment 3: Group project (20%)

Due: TBA
Students are expected to complete a group project based on the materials learned in
lectures. Group size is limited to a maximum of 5. The project will require data collection,
data analysis and complex calculations with the help of spreadsheet software such as
Excel. Upon completion of their projects, each group will submit a report and make a
presentation of their findings. Both the content of the report and the quality of the
presentation will be evaluated.

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Assessment 4: Final exam (Individual) (40%)

Due: During formal examination period
Length: 120 minutes
 The exam will comprise some short answer questions and mostly detailed
computational questions of multiple parts. Attempting the exam is compulsory.
Failure to attempt the exam during the period that it is available will result in a
Failure Non-Submission grade being awarded for the subject.

 The final exam will cover the whole subject. It will be conducted as scheduled by the
University’s Assessment and Progression Subject and will be of two hours
duration. A formula sheet will be provided. The minimum requirement to pass the
subject is an overall mark of 50 percent.

 The exam is closed book. Only non-programmable calculators are permitted.

Marking criteria and standards

The final exam topics will reflect all work done in tutorials. The structure of the exam will be
outlined in class

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Teaching Activities
LEARNING RESOURCES
Textbook  Hull, J. (2016), Fundamentals of futures and options markets, 9th
edition, Pearson, Harlow, Essex.
 Hull, J., (2021). Options, futures, and other derivatives. Boston: Prentice
Hall,

References  Kodukula, P.S., & Papudesu, C. (2006). Project Valuation Using Real
Options: A Practitioner's Guide.

LEARNING RESOURCES
E-library http://search.proquest.com/login
Username: UEHCMC2010
Password: thuvien0810

E-learning http://elearning.isb.edu.vn/

Referencing requirements
Student assignments are to contain original content created by the students. Assignments will
be rejected if they include plagiarised content or contain excessive amounts of quoted/cited
material and minimal original content. Students will receive a grade of ZERO (0%) for any
assignments rejected for this reason. Written assignments WILL BE RANDOMLY checked by
the lecturer with Turnitin.com, an online plagiarism -checking tool.

Furthermore, your reference to support your statements must be from a reliable source, such
as textbooks, additional reading materials, and reference books. However, many websites are
not reliable sources. Examples are Wikipedia.org, about.com, and ask.com. If you are not sure
if a reference is acceptable or not, please contact the l ecturer.

The Publication Manual of the American Psychological Association (APA) 6th ed ., will serve as
the primary reference materials for all students. Therefore, all papers must be submitted in
APA format. The mechanics of student papers and work will b e evaluated, as well as the
content. It is imperative that guidelines be reviewed before an assignment is begun. It is also
important that the required submission format be followed in compiling the final paper or
assignment.

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SCHEDULE OF ACTIVITIES

Dr. Tran Minh Hoang Ms. Linh Vu

WEEK SESSION (Lectures): (Exercises):
10 sessions 5 sessions
Topic 1:
— Introduction to Derivatives

1 1 — Futures and Forwards Contracts

Chapters 1 and 2

Topic 2:

— Determination of forward and

2
futures prices.

Chapters 2 and 5
2 — Groups’ presentation of homework results for Topic 1 & 2

— Correction
3
— In-class test

Topic 3:

— Hedging strategies using futures

4
3 Chapter 3

Topic 4:

— Introduction to Options
5
4
Chapters 9 and 10

— Groups’ presentation of homework results for Topic 3 & 4

6 — Correction

— In-class test
Topic 5:

5 — Trading Strategies Involving

7 Options

Chapter 11

Topic 6:

— Binomial tree option pricing

8
6 Chapter 12

— Groups’ presentation of homework results for Topic 5 & 6

9 — Correction

— In-class test

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Dr. Tran Minh Hoang Ms. Linh Vu

WEEK SESSION (Lectures): (Exercises):
10 sessions 5 sessions
Midterm

10 Guest lecture by Prof. Dr Mai Hữu Minh

— Groups’ presentation of homework results for Topic 7

— Correction
7 11
— In-class test

Topic 7:

— The Black-Scholes-Merton Model

8 12
Chapters 13

Topic 8:

13 — Introduction to Real options

Chapter 36 of Hull (2021)

9
— Groups’ presentation of homework results for Topic 8 & 9

14 — Correction

— In-class test
Revision + Group presentation of the
15
10 Group project

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General Information & Policy

Referencing
Plagiarism
Student assignments are to contain original content created by the students. Assignments
will be rejected if they include plagiarised content or contain excessive amounts of
quoted/cited material and minimal original content. Students will receive a grade of ZERO
(0%) for any assignments rejected for this reason. Written assignments WILL BE checked
by the lecturer with Turnitin.com, an online plagiarism-checking tool.
Sources
Furthermore, your reference to support your statements must be from a reliable source,
such as textbooks, additional reading materials, and reference books. However, many
websites are not reliable sources. Examples are Wikipedia.org, about.com, and ask.com. If
you are not sure if a reference is acceptable or not, please contact the lecturer.
Referencing & Citation
The Publication Manual of the American Psychological Association (APA) 6th ed., will
serve as the primary reference materials for all students. Therefore, all papers must be
submitted in APA format. The mechanics of student papers and work will be evaluated, as
well as the content.

Submission
Assignment cover sheet
 All assignments are required to be submitted with an Assignment Cover Sheet.
 Group assignments are to be submitted with a Group Assignment Cover Sheet as
well as a Peer Evaluation Form depending on the request of unit instructor.
Non-contributing team members can sometimes be an issue with group-work structured
assessment. Individual student group work scores may be adjusted as a result of peer
dissatisfaction with a particular student’s contribution to group work assignments, as
reflected in submissions of the evaluation form.
Note:
 Assignment cover sheets and the evaluation form can be located on MyISB system
 Students are advised to keep a copy of all assignments submitted for marking.

Submission style
Assignments are expected to achieve a professional standard:
 Be typed, one and a half spaced, on A4 paper
 Use a simple clear format, suitable for a report to senior management in a commercial
organisation.

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Submission method
Soft copy: submitted electronically via E-learning system by 11:55 PM on the due date
(Suggested title: Student name_Unitname_Name of Assignment).
Hard copy: submitted to ISB Submission Box at the Reception Area (17 Pham Ngoc
Thach) by the due date.

Late assignment and make-up policy

No late assignments will be accepted unless prior authorisation granted by the Academic
Department based on a Special Consideration Application for assessment task extension.
Students must complete all assessments on the assigned dates including quizzes, mid-
term test, and final exam. If there are extenuating or unforeseen circumstances, students
must follow the school’s policies and procedures accordingly.

Attendance
Students are required to attend a minimum of 80% of all classes (which normally 12/15
sessions).
Other cases equating to an absence:
 Arriving to class late by 15 minutes at the beginning,
 Arriving late by 5 minutes after the break
 Leaving prior to the scheduled end time without the permission of the lecturer
If you are unable to attend any session, please let your lecturer know AND submit a
request for absence form to program administrator prior to the session.

 IMPORTANT: Students will not be allowed to sit in the final examination if violating the
above absence rule.

Electronic device use

 Cell phones will be turned off or switched to vibrate mode before class starts.
 No phone calls or text messaging are allowed inside classroom during class time.
 Portable listening and/or music devices may not be operated in the classroom.
 Headphones and/or ear buds of any type may not be worn while in the classroom
whether operating or not.
 Laptop and other electronic devices are not permitted unless specifically
authorised by the lecturer exclusively for note taking and doing class work.

 IMPORTANT: If you are in violation of these policies you will be excused from class
and an absence will be assessed.

Email etiquette
Your lecturers receive many emails each day. In order to enable them to respond to your
emails appropriately and in a timely fashion, students are asked to follow basic
requirements of professional communication.

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Your emails should:

 Have a concise and descriptive title, including the class and name of the unit you
are enquiring about
 Be clear about the intention of their emails
 Use appropriate tone and language, proof-read what is written in the email before
sending it.
Students should also allow 3-4 working days for a response before following up. If the
matter is legitimately urgent, you may indicate “URGENT” in the email subject header.
Make an appointment: If your email request is complex and requires a lengthy response it
may be probably best to make an appointment with your lecturer/instructor to meet in
person.

Student behaviour guidelines

Everyone must behave professionally. Students are expected to demonstrate respect for
teacher and fellow students at all times. Behaviour that is disruptive to a positive learning
environment reported to the teacher will result in a warning on the first instance; the
second instance might result in a failing grade along with expulsion from the school.
Unacceptable behaviors can be:
 Cheating on an exam
 Collaborating with others on work to be presented, if contrary to the stated rules of
the course
 Submitting, if contrary to the rules of the course, work previously submitted in
another course
 Knowingly and intentionally assisting another student in any of the above actions,
including assistance in an arrangement whereby work, classroom performance,
examination, or other activity is submitted or performed by a person other than the
student under whose name the work is submitted or performed
 Plagiarising

 IMPORTANT:
 First violation will result in a grade ZERO (0%) for that assignment.
 Second violation will result in a failing course grade.

Disability support services

Students with disabilities are advised that accommodations and services are available at
UEH-ISB. It is the student's responsibility to contact UEH-ISB office and submit appropriate
documentation prior to receiving such services.

Additional information
This unit guide may be revised at the discretion of the Academic Department with approval
from Program Academic Director and School Academic Committee where appropriate.

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