Derivative Securities

AY2021/2022 Semester 1

This course is an introductory course on financial derivatives and derivatives-linked investments. The derivatives covered include forwards, futures, swaps and options on different underlying assets like stocks, stock indices, commodities and foreign exchange. Through this course, students will learn the features of various derivatives and how to price, value (calculate the Profit/Loss) and structure them for investment and risk management. Students will also learn basic and slightly more advance option strategies and how to use them for hedging and trading. They will be able to design arbitrage strategies to take advantage of mispricing in various derivatives. A good understanding of derivatives and its usage/abuses is a prerequisite for effective management of any company as financial risks can cause substantial damage to the P/L of an otherwise well managed firm. Graduates with solid grounding in derivative investments can take up careers as traders, derivatives specialists/advisors, derivatives sales experts, financial engineers and risk managers in treasury departments, trading floors, asset management and risk management divisions in banks and major corporates. On an individual level, understanding of derivatives will help one to appreciate the risk and rewards in the many derivatives-linked investments now increasingly made available to retail investors.