FINC3012: Semester 2, 2022

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Units FINC3012 Semester 2 2022 [Normal day]

Unit of study_

FINC3012: Derivative Securities

Semester 2, 2022 [Normal day] - Camperdown/Darlington, Sydney

Overview

Options, futures and swaps are derivatives of underlying securities such as commodities, equities and bonds. These types of securities are increasingly used to manage risk exposure and as a relatively low-cost-way of taking a position in a security or portfolio. They are also being used as part of senior management compensation as a way of attempting to align the interests of shareholders with that of management. This unit is designed to provide an introduction to this important area of finance without requiring too high a level of mathematical sophistication. However, strong quantitative skills are an advantage in this subject.

Unit details and rules

Unit code	FINC3012
Academic unit	Finance
Credit points	6
Prohibitions ?	None
Prerequisites ?	FINC2012
Corequisites ?	None
Assumed knowledge ?	None
Available to study abroad and exchange students	Yes

Teaching staff

Coordinator	Elvis Jarnecic, elvis.jarnecic@sydney.edu.au
Tutor(s)	Tanaka Nhongo, tanaka.nhongo@sydney.edu.au
Tutor(s)	Salaar Bin Tassadaq, salaar.bintassadaq@sydney.edu.au

Type	Description	Weight	Due	Length
Final exam (Record+)	Final exam On line Exam	50%	Formal exam period	2 hours
Outcomes assessed:
Tutorial quiz	Canvas Quiz 1 Covers weeks 1-3	10%	Week 04 Due date: 23 Aug 2022 at 10:00	10 questions
Outcomes assessed:
Tutorial quiz	Canvas Quiz 2 Covers weeks 4-6	10%	Week 07 Due date: 13 Sep 2022 at 10:00	10 questions
Outcomes assessed:
Assignment	Group assignment Application of derivative strategies to a real world example.	20%	Week 09 Due date: 04 Oct 2022 at 23:00 Closing date: 11 Oct 2022	7 pages
Outcomes assessed:
Tutorial quiz	Canvas Quiz 3 Covers weeks 7-9	10%	Week 10 Due date: 11 Oct 2022 at 10:00	10 questions
Outcomes assessed:
= group assignment ? = Type B final exam ?

Assessment summary

Detailed information for each assessment can be found on Canvas.

Assessment criteria

The University awards common result grades, set out in the Coursework Policy 2014 (Schedule 1).

As a general guide, a high distinction indicates work of an exceptional standard, a distinction a very high standard, a credit a good standard, and a pass an acceptable standard.

Result name	Mark range	Description
High distinction	85 - 100	Awarded when you demonstrate the learning outcomes for the unit at an exceptional standard, as defined by grade descriptors or exemplars outlined by your faculty or school.
Distinction	75 - 84	Awarded when you demonstrate the learning outcomes for the unit at a very high standard, as defined by grade descriptors or exemplars outlined by your faculty or school.
Credit	65 - 74	Awarded when you demonstrate the learning outcomes for the unit at a good standard, as defined by grade descriptors or exemplars outlined by your faculty or school.
Pass	50 - 64	Awarded when you demonstrate the learning outcomes for the unit at an acceptable standard, as defined by grade descriptors or exemplars outlined by your faculty or school.
Fail	0 - 49	When you don’t meet the learning outcomes of the unit to a satisfactory standard.

For more information see sydney.edu.au/students/guide-to-grades.

For more information see guide to grades.

Late submission

In accordance with University policy, these penalties apply when written work is submitted after 11:59pm on the due date:

Deduction of 5% of the maximum mark for each calendar day after the due date.
After ten calendar days late, a mark of zero will be awarded.

Academic integrity

The Current Student website provides information on academic integrity and the resources available to all students. The University expects students and staff to act ethically and honestly and will treat all allegations of academic integrity breaches seriously.

We use similarity detection software to detect potential instances of plagiarism or other forms of academic integrity breach. If such matches indicate evidence of plagiarism or other forms of academic integrity breaches, your teacher is required to report your work for further investigation.

You may only use artificial intelligence and writing assistance tools in assessment tasks if you are permitted to by your unit coordinator, and if you do use them, you must also acknowledge this in your work, either in a footnote or an acknowledgement section.

Studiosity is permitted for postgraduate units unless otherwise indicated by the unit coordinator. The use of this service must be acknowledged in your submission.

Learning support

Simple extensions

If you encounter a problem submitting your work on time, you may be able to apply for an extension of five calendar days through a simple extension.  The application process will be different depending on the type of assessment and extensions cannot be granted for some assessment types like exams.

Special consideration

If exceptional circumstances mean you can’t complete an assessment, you need consideration for a longer period of time, or if you have essential commitments which impact your performance in an assessment, you may be eligible for special consideration or special arrangements.

Special consideration applications will not be affected by a simple extension application.

Using AI responsibly

Co-created with students, AI in Education includes lots of helpful examples of how students use generative AI tools to support their learning. It explains how generative AI works, the different tools available and how to use them responsibly and productively.

Weekly schedule

WK	Topic	Learning activity
Week 01	Welcome tutorial	Tutorial (1 hr)
Week 01	Introduction and unit overview	Lecture (2 hr)
Week 02	Introduction and unit overview	Tutorial (1 hr)
Week 02	Mechanics of futures markets	Lecture (2 hr)
Week 03	Mechanics of futures markets	Tutorial (1 hr)
Week 03	Hedging strategies using futures	Lecture (2 hr)
Week 04	Hedging strategies using futures	Tutorial (1 hr)
Week 04	Determination of forward and futures prices	Lecture (2 hr)
Week 05	Determination of forward and futures prices	Tutorial (1 hr)
Week 05	Swaps 1	Lecture (2 hr)
Week 06	Swaps 1	Tutorial (1 hr)
Week 06	Swaps 2	Lecture (2 hr)
Week 07	Swaps 2	Tutorial (1 hr)
Week 07	1. Mechanics of options markets; 2. Properties of stock options	Lecture (2 hr)
Week 08	1. Mechanics of options markets; 2. Properties of stock options	Tutorial (1 hr)
Week 08	Option trading strategies	Lecture (2 hr)
Week 09	Option trading strategies	Tutorial (1 hr)
Week 09	Binomial trees and risk-neutral valuation	Lecture (2 hr)
Week 10	Binomial trees and risk-neutral valuation	Tutorial (1 hr)
Week 10	Black-Scholes-Merton option pricing model	Lecture (2 hr)
Week 11	Black-Scholes-Merton option pricing model	Tutorial (1 hr)
Week 11	Options on stock indices, currencies and futures	Lecture (2 hr)
Week 12	Options on stock indices, currencies and futures	Tutorial (1 hr)
Week 12	1. Delta; 2. Exotic options	Lecture (2 hr)
Week 13	1. Delta; 2. Exotic options	Tutorial (1 hr)
Week 13	1. Derivatives mishaps and what we can learn from them; 2. Review	Lecture (2 hr)

Attendance and class requirements

Lecture recordings: All lectures and seminars are recorded and will be available on Canvas for student use. Please note the Business School does not own the system and cannot guarantee that the system will operate or that every class will be recorded. Students should ensure they attend and participate in all classes.

Study commitment

Typically, there is a minimum expectation of 1.5-2 hours of student effort per week per credit point for units of study offered over a full semester. For a 6 credit point unit, this equates to roughly 120-150 hours of student effort in total.

Required readings

Textbook: Derivative Securities Reader (Based on Fundamentals of Futures and Options Markets, by John C Hull) Pearson Education.

Other readings for this unit can be accessed through the Library eReserve, available on Canvas.

Learning outcomes

Learning outcomes are what students know, understand and are able to do on completion of a unit of study. They are aligned with the University's graduate qualities and are assessed as part of the curriculum.

Outcomes
Graduate qualities

At the completion of this unit, you should be able to:

LO1. identify and distinguish between the various forms of derivatives instruments
LO2. apply futures strategies for long and short hedge
LO3. apply option strategies such as covered calls, spreads and combinations
LO4. price options, futures and swaps
LO5. utilise options and futures contracts for portfolio management purposes.

Graduate qualities

The graduate qualities are the qualities and skills that all University of Sydney graduates must demonstrate on successful completion of an award course. As a future Sydney graduate, the set of qualities have been designed to equip you for the contemporary world.

GQ1	Depth of disciplinary expertise Deep disciplinary expertise is the ability to integrate and rigorously apply knowledge, understanding and skills of a recognised discipline defined by scholarly activity, as well as familiarity with evolving practice of the discipline.
GQ2	Critical thinking and problem solving Critical thinking and problem solving are the questioning of ideas, evidence and assumptions in order to propose and evaluate hypotheses or alternative arguments before formulating a conclusion or a solution to an identified problem.
GQ3	Oral and written communication Effective communication, in both oral and written form, is the clear exchange of meaning in a manner that is appropriate to audience and context.
GQ4	Information and digital literacy Information and digital literacy is the ability to locate, interpret, evaluate, manage, adapt, integrate, create and convey information using appropriate resources, tools and strategies.
GQ5	Inventiveness Generating novel ideas and solutions.
GQ6	Cultural competence Cultural Competence is the ability to actively, ethically, respectfully, and successfully engage across and between cultures. In the Australian context, this includes and celebrates Aboriginal and Torres Strait Islander cultures, knowledge systems, and a mature understanding of contemporary issues.
GQ7	Interdisciplinary effectiveness Interdisciplinary effectiveness is the integration and synthesis of multiple viewpoints and practices, working effectively across disciplinary boundaries.
GQ8	Integrated professional, ethical, and personal identity An integrated professional, ethical and personal identity is understanding the interaction between one’s personal and professional selves in an ethical context.
GQ9	Influence Engaging others in a process, idea or vision.

Outcome map

Learning outcomes	Graduate qualities
Learning outcomes

Responding to student feedback

This section outlines changes made to this unit following staff and student reviews.

Assignment moved earlier so students receive feedback within semester.

Additional information

Disclaimer

The University reserves the right to amend units of study or no longer offer certain units, including where there are low enrolment numbers.

To help you understand common terms that we use at the University, we offer an online glossary.

Current students

Overview

Overview

Unit details and rules

Teaching staff

Assessment

Assessment

Assessment summary

Assessment criteria

Late submission

Academic integrity

Learning support

Learning support

Simple extensions

Special consideration

Using AI responsibly

Weekly schedule

Weekly schedule

Attendance and class requirements

Study commitment

Required readings

Learning outcomes

Learning outcomes

Graduate qualities

Outcome map

Responding to student feedback

Responding to student feedback

Additional information

Additional information

Disclaimer

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