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2018/2019  KAN-CCMVI2067U  Investments: Financial Markets, Options and Derivatives

English Title
Investments: Financial Markets, Options and Derivatives

Course information

Language English
Course ECTS 7.5 ECTS
Type Elective
Level Full Degree Master
Duration Summer
Start time of the course Summer
Timetable Course schedule will be posted at calendar.cbs.dk
Max. participants 60
Study board
Study Board for MSc in Economics and Business Administration
Course coordinator
  • Course instructor - Shlomi Ben Yehuda, Tel Aviv University, Shlomib@post.tau.ac.il
    Sven Bislev - Department of Management, Society and Communication (MSC)
In case of any academic questions related to the course, please contact the course instructor or ISUP academic director, Sven Bislev at sb.msc@cbs.dk
Main academic disciplines
  • Finance
Teaching methods
  • Face-to-face teaching
Last updated on 05/12/2018

Relevant links

Learning objectives
To achieve the grade 12, students should meet the following learning objectives with no or only minor mistakes or errors:
  • Apply the aspects of fixed income assets on bond's pricing and its risk sensitivity. Analyze and explain the effect of bankruptcy risk on the yield to maturity of the bond
  • Implement the use of leverage in common financial problems, and analyze the effects of using leverage on risk and return
  • Analyze option pricing (theory and practice) using the same models used in most financial firms
  • Describe the process of financial markets movements and the role derivatives play in stability and instability of financial markets
  • Identify hidden derivatives in real "simple life" agreements and deals
  • Most important: handle portfolio management based on understanding the characteristics of investments
Course prerequisites
Completed social science Bachelor. Fundamentals in economics and finance
Examination
Investments: Financial Markets, Options and Derivatives:
Exam ECTS 7.5
Examination form Written sit-in exam on CBS' computers
Individual or group exam Individual exam
Assignment type Written assignment
Duration 4 hours
Grading scale 7-step scale
Examiner(s) One internal examiner
Exam period Summer, Ordinary exam: 4 hour written exam in the period of 30 July - 2 August 2019
Retake exam: 4 hour written exams in the period of 1-7 October 2019
3rd attempt (2nd retake) exam: 72-hour home assignment- 25-28 November 2019 – for all ISUP courses simultaneously

Exam schedules available on https:/​/​www.cbs.dk/​uddannelse/​international-summer-university-programme-isup/​courses-and-exams
Aids Limited aids, see the list below:
The student is allowed to bring
  • Any calculator
  • Language dictionaries in paper format
The student will have access to
  • Advanced IT application package
Make-up exam/re-exam
Same examination form as the ordinary exam
If the number of registered candidates for the make-up examination/re-take examination warrants that it may most appropriately be held as an oral examination, the programme office will inform the students that the make-up examination/re-take examination will be held as an oral examination instead.
Retake exam: 4 hour written sit-in exam, new exam question
Exam form for 3rd attempt (2nd retake): 72-hour home project assignment, max. 10 pages.
Course content and structure

This course will cover the different investment assets and investment instruments including debt (bonds), equity, derivatives as well as the cross relation between them. This will give the students a broad view on recent financial markets and the macro economy, markets that have developed and adjusted to the recent technology available for trading. 

 

The course will cover recent and previous crisis, the correlation (or not?) of  financial markets to real economies, effects on savings, pension, risk taking etc.

 

The role of big investors (hedge funds, saving funds and others) will be examined, and a question mark on them supporting/endangering  financial markets will be raised.

 

The first part of the course will cover the debt market, including the recent developments in the interest rates and central banks.

 

In the second part we learn about options (and other derivatives) and emphasize the relation between risk and return.

 

The third part will combine bonds and options, add equity (stocks) and show the link between the three, discussing arbitrage and leverage.

 

The forth part will use the previous material to explain the 2008 crisis, the hedge-fund industry, commodities prices, Forex markets employee options, hedging, etc.

 

"Low interest rate:  the impact on investments and long term savings"

Please read the following short articles:
1. "The long-term impact of low rates" , September 9 2012, Financial Times 
2. "Why low interest rates are now doing more harm than good" , September 2 2016, The Telegraph 


Class 1&2. Bonds: structure, YTM (yield to maturity), duration, risk, yield curve and spreads; discussion in class.
Class 3. Options, basics, definition, graphical demonstration and Arbitrage; Hull chapter 9.
Class 4&5. Strategies, Put Call Parity (PCP), the Binomial model. Hedging and arbitrage, contingent claims. Demonstration: the option value of stocks, the effect on the debt YTM; Hull chapter 9,10,11.
Class 6&7. B&S model, the Greeks, evaluating employee options, volatility and the volatility index (VIX, the fear factor); Hull chapter 13,17.


Feedback activity: an optional "take home exam"

 

Class 8. Debt, leverage, derivatives and recent crisis; Hull 14,22,23.
Class 9. Futures, Commodity markets, Forex markets; Hull chapter 5
Class 10 The Macro Economy and current investments shift towards risk; discussion in class.
Class 11. The role of big investors: hedge funds, mutual funds, algorithmic trading and stability/instability; discussion in class.

Description of the teaching methods
Tests, lecture notes, case studies, in class examples, worksheets, excel spreadsheets, and articles from financial press, which will form the basis for of the class discussions.
Feedback during the teaching period
An optional "take home exam" based on the material covered so far.
Student workload
Preliminary assignment 20 hours
Classroom attendance 33 hours
Preparation 126 hours
Feedback activity 7 hours
Examination 20 hours
Further Information

Preliminary Assignment: To help students get maximum value from ISUP courses, instructors provide a reading or a small number of readings or video clips to be read or viewed before the start of classes with a related task scheduled for class 1 in order to 'jump-start' the learning process.

 

Course timetable is available on https://www.cbs.dk/uddannelse/international-summer-university-programme-isup/courses-and-exams

 

We reserve the right to cancel the course if we do not get enough applications. This will be communicated on https://www.cbs.dk/uddannelse/international-summer-university-programme-isup/courses-and-exams end February 2019 at the latest.

 

 

Expected literature

Mandatory readings:

 

John C. Hull, "Options futures and other derivatives " 7th-10th edition

"The long-term impact of low rates" , September 9 2012, Financial Times 

"Why low interest rates are now doing more harm than good" , September 2 2016, The Telegraph 

"Do Hedge Fund Managers Misreport Returns? Evidence from the Pooled Distribution", Boolen and Pool, 2009, the Journal of Finance

" Mutual fund performance", Sharp, 1966, the Journal of Business

" Mutual fund performance", Fama and French, 2008, the Journal of Finance

"Boys will be boys: gender, overconfidence and common stock investments", Barber ans Odean, 2001, the Quarterly Journal of Economics

 

Additional relevant readings:

 

Benninga, Mofkadi, "Principle of Finance with Excel" 3rd edition, 2017

"Pound's flash crash 'was amplified by inexperienced traders'", January 13 2017, the Guardian

"Bonuses don't have that much to do with performance", June 3 2015, The Telegraph

"Here’s all the money in the world, in one chart", January 29, 2016, MarketWatch 

 

Last updated on 05/12/2018