School of Business and Management

CHRIST (Deemed to be University)

Course Plan

Program Master of Business Administration

Course Code & Name MBA 443F: Derivatives

Trimester First Trimester; July - September 2021

Hours & Credits (1 Credit =
10 hours)
30 hours, 3 Credits

Course Anchor Prof Aniruddha Oak

Course Facilitators at –
Bangalore, Central Campus
Prof Aniruddha Oak
Course Facilitators at –
Bangalore,Kengeri Campus
Prof Aniruddha Oak
Course Facilitators at –
Bangalore, BGR Campus
Prof Shabarisha N
Course Facilitators at –
Delhi, NCR Campus
Dr N. N. Pandey
Course Facilitators at – Pune,
LavasaCampus
-
Prof Aniruddha Oak
e-mail: Aniruddha.Oak@christuniversity.in
Phone: 0091-9945282102

Prof Shabarisha N
Course Anchor & Faculty e-mail: Shabarisha.N@christuniversity.in
Contact information Phone: 0091-7204117808

Dr N. N. Pandey
e-mail: Nirakarnath.Pandey@christuniversity.in
Phone: 0091-9634095759/ 8077958151
Course Name: Derivatives Course Code: MBA4042F
Total number of hours: 30 Hrs Credits: 3
Course This course is offered to the Finance students of the MBA programme. This
Description course provides comprehensive knowledge about the functioning of the
Derivatives Markets using a practical approach. It also aims to ignite sufficient
interest in students for them to consider this area for their career growth.
Course At the end of this course, students will develop good understanding of the
Objectives Derivatives instruments, including Forwards, Futures, Options and Swaps.
They will be able to analyse the effectiveness of different hedging and trading
strategies using these instruments. They will also be able to determine the
prices of call and put Options using Binomial and Black-Scholes-Merton
models.

Terminology** AACSB NBA

Program Learning Goals (PLGs) Program Outcomes (POs)
Program Learning Objective (PLO)
Course Learning Outcomes (CLO) Course Outcomes (COs)

Progamme Learning Goals – Course Objective Matrix (AACSB)/ NBA

Sl.N CLO/CO RB Uni CIA PLO PLG PO(Level)
o T t
PO2 (3)
Make use of PLO4.1
Foster
Derivatives Make use
Analytical
instruments, of data to
I and Critical and Critical
1 including L3 I address the
II Thinking abilities for
Forwards, business
data-based
Futures, Options problem.
decision
and Swaps.
making
Evaluate the PLO 2.4 PO2 (3)
effectiveness of Recommen Foster
Functional
different d Analytical
Knowledg
hedging L5 I and appropriate and Critical
2 II e and
strategies using II solutions abilities for
Applicatio
Forward, Futures for data-based
n
and Options managerial decision
contracts. problems making
PLO 2.4 PO2 (3)
Assess the
Recommen Foster
effectiveness of Functional
d Analytical
different trading Knowledg
appropriate and Critical
3 strategies using L5 III e and
III solutions abilities for
Call and Put Applicatio
for data-based
Options, and n
managerial decision
Swaps.
problems making
Determine the PLO 2.4 Functional PO2 (3)
4 prices of Call L5 IV IV Recommen Knowledg Foster
and Put Options d e and Analytical
 appropriate and Critical
using Binomial
solutions abilities for
and Black- Applicatio
for data-based
Scholes-Merton n
managerial decision
models.
problems making
PO6 (2)
Develop a tool
Identify
that would help
PLO 4.5 business
traders analyse
Construct opportunities
the implications Critical
5 L6 V III integrated , design and
of their positions Thinking
solution implement
in different
framework innovations
Derivatives
in work
instruments.
environment
POM - Course Mapping
Unit Unit details Week CO-PO Exercises Hours Pedagogy Resource/ Reference
numbe (starting per week (teaching learning details
r and end methods used)/
dates) activities and or
class trips/ dates
for assessment
Introduction (Options,
Futures, and Other
Derivatives)
Over-the-counter market v/s
trading on an exchange,
advantages and Practice
disadvantages of both these CO1/ Problems Chapter 1 - Introduction1
3 Discussion
I approaches, PLO4.1 from
Forwards, Futures and Chapter 1
Options contracts and their
respective pay-
offs,Arbitrage opportunities,
Uses and mis-uses of
Derivatives.
Mechanics of Futures CO2/ Practice 3 Presentations and Chapter 2 – Mechanics of
Markets PLO2.4 Problems Discussion Futures Markets
Key features of a Futures from
II contract, Chapter 2
Convergence of Futures and
Spot prices,

1
All the chapters mentioned in this column are from the recommended textbook “Options, Futures and Other Derivatives” by John C Hull
 Margin requirements,
Role of a clearinghouse,
Role of collateralisation,
Normal and inverted
Futures market,
Delivery process v/s cash
settlement,
Different trading order
types.
Hedging Strategies using
Futures
Short and long hedges,
Arguments for and against
hedging,
Basis risk and its sources, Practice
II Cross hedging, minimum CO2/ Problems Presentations and Chapter 3 – Hedging
3
variance hedge ratio and the PLO2.4 from Discussion Strategies using Futures
optimal number of futures Chapter 3
contracts needed to hedge
an exposure,
Use of stock index futures
contracts to change a stock
portfolio’s beta.
Interest Rates CO2/ Practice 3 Presentations and Chapter 4 – Interest Rates
Treasury rates, LIBOR, PLO2.4 Problems Discussion
repo rates, and risk-free from
rate, Chapter 4
II Value of an investment
using different
compounding frequencies,
Conversion of interest rates
based on different
 compounding frequencies,
Theoretical price of a bond
using spot rates,
Derivation of forward
interest rates using spot
rates,
Value of the cash flows
from a forward rate
agreement (FRA).
Determination of Forward
and Futures Prices
Investment and
consumption assets,
Short-selling,
Relationship between
forward and spot prices,
Calculation of the forward
price given the underlying
asset’s spot price using
Practice
II arbitrage argument, Chapter 5 – Determination
CO2/ Problems Presentations and
Relationship between 3 of Forward and Futures
PLO2.4 from Discussion
forward and futures prices, Prices
Chapter 5
Income, storage costs, and
convenience yield, and
calculation of futures prices
for commodities using
these,
Various delivery options
available in the futures
markets,
Contango and
backwardation.
 Interest Rate Futures
Day count conventions, and
their application to
calculation of interest,
Clean price, dirty price and
Practice
accrued interest,
CO2/ Problems Chapter 6 – Interest Rate
II Conversion factor and cost 3 Discussion
PLO2.4 from Futures
of delivering a bond into a
Chapter 6
Treasury bond futures
contract,
Theoretical futures price for
a Treasury bond futures
contract.
Swaps
Plain vanilla interest rate
swap and its cash flows,
Role of financial
Practice
intermediaries in the swaps
CO3/ Problems
III market, 3 Discussion Chapter 7 - Swaps
PLO2.4 from
Comparative advantage
Chapter 7
argument for the existence
of interest rate swaps,
Currency swap and its cash
flows.
Mechanics of Options CO3/ Practice 3 Discussion Chapter 8 – Mechanics of
Markets PLO2.4 Problems Options Markets
III Types, position variations, from Chapter 9 – Properties of
and typical underlying Chapters 8 Stock Options
assets of options, and 9
Specifications of exchange-
traded stock option
contracts,
 Trading, commissions,
margin requirements, and
exercise for exchange-
traded options.

Properties of Stock
Options
Six factors that affect an
option’s price,
Upper and lower bounds for
option prices,
Put-call parity,
Early exercise features of
American call and put
options.
Trading Strategies
involving Options
Practice
III Trading strategies using
CO3/ Problems Chapter 10 – Trading
Bull Spread, Bear Spread, 3 Discussion
PLO2.4 from Strategies using Options
Box Spread, Butterfly
Chapter 10
Spread, Straddle and
Strangle
Binomial Trees CO4/ Practice 3 Discussion Chapter 11 – Binomial
Value of American and PLO2.4 Problems Trees
European options using a from Chapter 13 – The Black-
IV & V one step and two-step Chapters11 Scholes-Merton model
binomial model. and 13 Chapter 23 – Credit
Derivatives
The Black-Scholes-Merton
Model
Assumptions underlying the
Black-Scholes-
 Mertonoption pricing
model,
Value of options using the
Black-Scholes-Merton
model

Credit Derivatives
Credit Default Swaps,risks
associated with Credit
Derivatives

Prescribed and Reference Textbooks

S. No. Title Author Publisher Edition / Year

  Text Books
1 Options, Futures and Other Derivatives John C. Hull Pearson Education 9th edition
2 Derivatives: Principles and Practice Sundaram and Das McGraw Hill 2017
Reference Books    
3 Derivatives Markets Robert McDonald Boston: Addison-Wesley 3rd edition / 2013
4 Analysis of Derivatives for CFA Program Don M Chance AIMR 2003
2003 / 2nd
5 Futures and Options Vohra and Bagri TMH edition
6 Derivatives Demystified Andrew M. Chisholm John Wiley and Sons 2004
Derivatives Markets, Valuation, and Risk
7 Management Robert E. Whaley John Wiley and Sons 2006
Assessment Outline

Component Description Units Maximum Weightage Total

Marks
CIA 1 Multiple Choice Question Quiz I and II 20 20 20
CIA 2 Mid Term Exam I and II 50 25 25
CIA 3 Development of Excel based tool II III and V 20 20 20
CIA 4 Final Exam I, II III and IV 50 30 30
Attendance 5 5 5

ASSESSMENT OUTLINE DETAILS

CIA 1 - Multiple Choice Question (MCQ) Quiz

This MCQ quiz would be administered using Moodle in the last week of July 2021 and there would be no negative marking. This MCQ would
cover Units I and II.

CIA 2 - Mid Term Exam

Syllabus: Unit I and II
Date: Third week of August 2021
Pattern:
Maximum Marks = 50
Section A - Three questions of 10 marks each (3 x 10 = 30 marks)
Section B - Case Study (1 x 20 = 20 marks)

CIA 3 – Development of Excel based tool

This CIA would need to be undertaken in groups of 3 students.
Derivatives traders often have multiple positions in Futures, Options and other Derivatives instruments at any given point of time. Traders are
often interested in knowing the implications of holding these positions e.g. possible gains or losses at expiry for a range of stock prices. As a part
of this CIA, students would be expected to contact a Derivatives trader, understand their requirements and develop an Excel based tool that
would help the trader understand the implications of holding their positions. Students would also be expected to illustrate the implications of
adopting different trading strategies (e.g. Bull spread, Bear spread, Butterfly spread, Straddle, Strangle, etc) using this tool with actual data. The
deliverables for this CIA would be the Excel based tool and a Word document that clearly mentions the requirements that have been gathered,
how the tool has been developed, output generated by the tool, etc.
At the end of this CIA, students would be able to:
 gather requirements from Derivatives traders.
 develop a tool that will help the traders understand the implications of holding their positions.
 illustrate the implications of different trading strategies.
 write a suitable report.
CIA Evaluation Rubrics (AACSB and NBA)
CIA III (Development of Excel based tool) Rubrics

Program Learning PLG2, PLG4

Objective
Program Learning PLO2.4, PLO4.5
Outomes
Total Marks 20 Marks
Criteria/ CO- Excellent Very Good Good (3) Average (2) Needs
Weightage/PLO PO (5) (4) Improvement
(1)
Requirement All the All the Most of the Few No
Gathering 25% possible possible requirement requirement requirements
PLO4.5 requirement requirement s have been s have been have been
s have been s have been gathered. gathered. gathered.
gathered gathered.
from
multiple
sources.
 Tool Development CO5 The tool The tool The tool The tool The tool does
25% - provides provides provides provides not work as
PLO4.5 PO6 proper proper proper proper envisaged.
results and results and results in results in
charts, etc charts, etc most of the some of the
in all the in most of cases. cases.
cases. the cases.
Illustration of different CO3 All trading Most of the Many Few trading None of the
trading strategies - strategies trading trading strategies trading
25% PO2 have been strategies strategies have been strategies have
PLO2.4 illustrated. have been have been illustrated. been
illustrated. illustrated. illustrated.
Report Writing The report The report The report The report The report
25% provides all provides all provides provides does not
PLO4.5 the relevant the relevant most of the some provide any
details and details. relevant relevant relevant
also details. details. details.
provides
suggestions
for future
work.
*Weightage (Levels) can vary depending on assignments
Prepared by
(Faculty in-charge) Reviewed by Approved by
HoD