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MBA 642 Financial Derivatives
Kao, Robert


Mission Statement: The mission of the School of Graduate and Professional Studies at Park University is to provide leadership and directions to Park University's graduate and professional programs to assure that they are specialized, scholarly, innovative, and designed to educate students to be creative, independent, and lifelong learners within the context of a global community.

Vision Statement: Park University's School of Graduate and Professional Studies will be an international leader in providing innovative graduate and professional educational opportunities to learners within a global society.

Course

MBA 642 Financial Derivatives

Semester

S1P 2011 MB

Faculty

Kao, Robert

Title

Assistant Professor of Finance

Degrees/Certificates

Ph.D. – Texas A&M University
M.S. - University of Nebraska - Lincoln

Office Location

Norrinton 2B

Office Hours

Tuesday or Thursday 10:00 AM – 12:00 PM or by appointment

Daytime Phone

816-584-6852

E-Mail

robert.kao@park.edu

Class Days

----R--

Class Time

5:30 - 9:50 PM

Prerequisites

All students should enrolled in this class should have taken MBA615 and MBA640

Credit Hours

3


Textbook:

Fundamentals of Derivatives Markets, 1st Edition by Robert McDonald, Pearson, Prentice Hall, 2009

ISBN-10: 0321357175

Textbooks can be purchased through the MBS bookstore

Textbooks can be purchased through the Parkville Bookstore

Additional Resources:

Fundamentals of Futures and Options Markets, 6th Edition, 2009, John C. Hull, Pearson, Prentice Hall

ISBN-13 978-0-13-224226-4

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Course Description:
MBA 642 Financial Derivatives: This course provides the student with the necessary skills to value and to use options, futures, and related financial contracts. The financial derivatives are one of the constantly chancing and widely used instruments in todays financial markets. This course will provide rigorous fundamental valuation and explore the strategic and tactical dimensions of derivatives. The topics that will be covered include the valuation of futures contracts on stock indices, on commodities and Treasury instruments; the valuation of options; empirical evidence; strategies with respect to these assets; dynamic asset allocation strategies, of which portfolio insurance is an example; swaps; and the use (and misuse) of derivatives in the context of corporate applications. Prerequisites: MBA 615 and MBA 640. (Formerly FI 642)

Educational Philosophy:

  • Establish a classroom where ideas can be shared, students can be challenged in areas of topic learning, and real-world experiences can be applied.
  • Create an interactive environment which is based on lectures, readings, quizzes, dialogues, examinations, assignments, websites, and topic-related writings.
  • Motivate the class with available seminars and/or current events that would inspire and stimulate student’s learning interest.

Learning Outcomes:
  Core Learning Outcomes

  1. Analyze and differentiate the different types of derivatives such as forward contracts, futures contracts, swaps, and options.
  2. Identify the participants and basic mechanics of derivatives markets.
  3. Apply basic financial principles to compute the price or the price range of the derivatives.
  4. Evaluate key properties of the prices for these derivatives.
  5. Design optimal hedging strategies to manage investment risks using derivatives.


Core Assessment:

Class Assessment:

Individual Assignment:

I will assign end-of-chapter problems for every week. Students are urged to work on those problems. Assigned problems may be covered in the class if the time allowed. I will collect 7 assignments on the due date during the semester. The assignments should be turned in the class. Students may discuss the homework assignment with their classmates; however, all written work must be of their own. The assignments will be graded based on your efforts, not based on correct answers.

Group Assignment:

A case study will be prepared by a pre-designated group of 2 students. The group presenting a case will give a background on the topic dealt in the class, answer all questions relevant to the case, including questions from the audience, and furnish a written report. The total amount of work involved in a case presentation should be divided as equally as possible among the members in the group. While most of the times the entire group will receive the same grade for a case presented, the instructor reserves the right to grade on an individual rather than a group basis when significant deviations exist in individual responsibilities and/or performances in the group’s case analysis. POWER-POINT PRESENTATION IS ENCOURAGED.

Grading:

There will be one mid-term exam, one comprehensive final exam, homework assignments, and discussion questions during the session. The exams will consist of problems and essay type questions. Students are expected to take examinations at the scheduled times. There will be no make-up exams. Remedies are possible, but only in documented, urgent, and compelling circumstances, and only if I have been informed in advance. 

Grades will be based on completion of the required assignments as well as exams. Grades will be awarded according to the following schedule:

            Mid-Term Exam                                             100 points

            Final Exam                                                    100 points

            Homework (7 HW, each 20 pts)                       140 points

            Project/Presentation                                       200 points

            Discussion Questions (Best 6, each 10 pts.)        60 points           

            Total                                                              600 points

540 or above                          A

480-539                                 B

420-479                                 C

360-419                                 D

Below 359                               F

All final exams will be comprehensive and will be closed book and closed notes.  If calculators are allowed, they will not be multifunctional electronic devices that include features such as: phones, cameras, instant messaging, pagers, and so forth.

Late Submission of Course Materials:
Late submissions are not acceptable and will not be graded. Remedies are possible, but only in documented, urgent, and compelling circumstances, the instructor needs to be informed in advance.

Classroom Rules of Conduct:
Students are expected to arrive in the classroom before the class starts. Class disruptions from cell phones, pagers or any other device will not be allowed.  During exams, all cell phones etc. must be turned off.

Course Topic/Dates/Assignments:

Week/Date

Major Topics*

Assignments

Week 1/Jan. 13-17

Introduction to Mechanics of Derivatives Markets

Discussion questions (Will be provided)

Read: Ch. 1 & 2

Questions: (Will be provided)

Problems-Solving: 1.2, 1.5, 1.8, 1.9,  2.4, 2.5, 2.7, 2.13, 2.14

Week 2/Jan. 20-24

Risk Management and Strategies

Discussion questions (Will be provided)

 

Read: Ch. 3 & 4 

Questions: (Will be provided)

Problems-Solving: 3.1, 3.2, 3.4, 3.7, 3.10, 4.1, 4.3, 4.5, 4.6

Week 3/Jan. 27-31

Financial Forwards and Futures

Discussion questions (Will be provided)

Read: Ch. 5 & 6

Questions: (Will be provided)

Problems-Solving: 5.2, 5.3, 5.5, 5.8, 6.1, 6.3, 6.5, 6.7, 6.9

Week 4/Feb. 3-7

Interest Rate Forwards and Futures

Discussion questions (Will be provided)

 

Mid-Term Exam (Ch. 1-6)

Read Ch. 7

Questions: (Will be provided)

Problems-Solving: 7.2, 7.5, 7.9, 7.11, 7.15

Week 5/Feb. 10-14

Swaps and Put-Call Parity

 

Discussion questions (Will be provided)

Read Ch. 8 & 9

Questions: (Will be provided)

Problems-Solving: 8.1, 8.2, 8.4, 8.6, 9.1, 9.3, 9.4, 9.7

Project/Presentation Proposal Due

Week 6/Feb. 17-21

Binomial Options Pricing and the Black-Scholes Formula

Discussion questions (Will be provided)

Read Ch. 10 & 11

Questions: (Will be provided)

Problems-Solving: 10.1, 10.3, 10.4, 10.5, 11.3, 11.5, 11.6, 11.9

Week 7/Feb. 24-28

Financial Engineering and Corporate Applications

Discussion questions (Will be provided)

Read Ch. 12 & 13

Questions: (Will be provided)

Problems-Solving: 12.1, 12.3, 12.4, 12.6, 13.2, 13.7, 13.9, 13.11, 13.16

Week 8/Mar. 3-7

Project/Presentations

Final Exam: Comprehensive

  

*Note: Instructor reserves the right to change the subjects due to the progress of the class and unforeseen circumstances.

Academic Honesty:
As a learning community, the University upholds the highest standards of academic integrity in all its academic activities, by faculty, staff, administrators and students. Academic integrity involves much more than respecting intellectual property rights. It lies at the heart of learning, creativity, and the core values of the University. Those who learn, teach, write, publish, present, or exhibit creative works are advised to familiarize themselves with the requirements of academic integrity and make every effort to avoid possible offenses against it, knowingly or unknowingly. Park University 2010-2011 Graduate Catalog Page 20

Plagiarism:

Plagiarism involves the appropriation of another person's ideas, interpretation, words (even a few), data, statements, illustration or creative work and their presentation as one's own. An offense against plagiarism constitutes a serious academic misconduct.  Although offenses against academic integrity can manifest themselves in various ways, the most common forms of offenses are plagiarism and cheating. Plagiarism goes beyond the copying of an entire article. It may include, but is not limited to: copying a section of an article or a chapter from a book, reproduction of an art work, illustration, cartoon, photograph and the like and passing them off as one's own. Copying from the Internet is no less serious an offense than copying from a book or printed article, even when the material is not copyrighted.

Plagiarism also includes borrowing ideas and phrases from, or paraphrasing, someone else's work, published or unpublished, without acknowledging and documenting the source. Acknowledging and documenting the source of an idea or phrase, at the point where it is utilized, is necessary even when the idea or phrase is taken from a speech or conversation with another person.

Park University 2010-2011 Graduate Catalog Page 20


Attendance Policy:

Instructors are required to maintain attendance records and report absences. Excused absences can be granted by the instructor, for medical reasons, school sponsored activities, and employment-related demands, including temporary duty. Students are responsible for any missed work. Absences for two successive weeks, without approved excuse, will be reported to the Director of the individual graduate program, or to the Executive Director for the Graduate School, for appropriate action. Students with such a record of absences, without an approved excuse, may be administratively withdrawn from the class and notified that an "F" will be recorded, unless the student initiates official withdrawal from the class(es).Park University 2010-2011 Graduate Catalog Page 24

Disability Guidelines:
Park University is committed to meeting the needs of all students that meet the criteria for special assistance. These guidelines are designed to supply directions to students concerning the information necessary to accomplish this goal. It is Park University's policy to comply fully with federal and state law, including Section 504 of the Rehabilitation Act of 1973 and the Americans with Disabilities Act of 1990, regarding students with disabilities. In the case of any inconsistency between these guidelines and federal and/or state law, the provisions of the law will apply. Additional information concerning Park University's policies and procedures related to disability can be found on the Park University web page: http://www.park.edu/disability .

Copyright:

This material is protected by copyright
                               and can not be reused without author permission.

Last Updated:12/19/2010 11:48:00 PM