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2023/2024 KAN-CCMVI2067U Investments: Financial Markets, Options and Derivatives
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| Investments: Financial Markets, Options and Derivatives |
Course information |
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| 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 |
| Min. participants | 30 |
| Max. participants | 60 |
| Study board |
Study Board for cand.merc. and GMA (CM)
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| Course coordinator | |
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| For academic questions related to the course, please contact course instructor Shlomi Ben Yehuda (sby.fi@cbs.dk). | |
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| Teaching methods | |
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| Last updated on 22-11-2023 | |
Relevant links |
| Learning objectives | ||||||||||||||||||||||
To achieve the grade 12, students should meet the
following learning objectives with no or only minor mistakes or
errors:
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| Course prerequisites | ||||||||||||||||||||||
| Completed social science Bachelor. Fundamentals in economics and finance | ||||||||||||||||||||||
| Examination | ||||||||||||||||||||||
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| Course content, structure and pedagogical approach | ||||||||||||||||||||||
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This course is both theoretical and practical. No background in financial markets or knowledge related to investments is required. We analyze the current situation in the financial markets (i.e. 2024: inflation and a relatively high interest rate) with both historical and forward-looking perspective. The course covers different investment assets and investment
instruments including debt (bonds), equity and derivatives, and the
cross relation between them. Thus, it gives the students a
broad view on the macro economy and financial markets, markets
that have developed and adjusted to the new technology available
for trading.
In addition, the course covers recent and previous crisis, the correlation (or not?) of financial markets and real economies, effects on savings, risk taking etc. The role of big investors (hedge funds, saving funds and other institutional investors) is examined, and a question mark on them supporting/endangering financial markets is raised. The first part of the course covers the debt market, including
the recent developments in the interest rates and central
banks decisions.
In the second part we learn about options (and other derivatives) and emphasize the relationship between risk and return. The third part combines bonds and options, add equity (stocks) and show the link between the three, discussing arbitrage and leverage. The fourth part uses previous material to explain the 2008 crisis, the recent inflation, the hedge-fund industry, commodities prices, forex markets, employee options, hedging, etc. Preliminary assignment:
"Low interest rate: the impact on investments and
long term savings"
Please read the following short articles; think of the main
points raised in these articles in the perspective of 2024:
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 3. “Low interest rates fuel financial risk-taking, IMF
warns”, October 16 2019, Financial Times
4. "U.S. policymakers misjudged inflation threat until it
was too late", May 30 2022, The Washington Post
Class 1&2. Bonds: structure, YTM (yield to maturity), duration, risk, yield curve and spreads, nominal real and inflation; Hull chapter 4,6.
Class 6&7. The Binomial model. contingent claims. Demonstration: the option value of stocks, the effect on the yield to maturity; Hull chapter 11.
Feedback activity: an optional "take home exam"
Class 10&11. Futures, commodity markets, forex markets. Employee options. Debt, leverage, derivatives and recent crisis. The role of big investors: hedge funds, mutual funds, algorithmic trading and stability/instability; Hull chapter 5,14.
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| 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 | ||||||||||||||||||||||
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| Further Information | ||||||||||||||||||||||
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6-week course.
Preliminary Assignment: The course coordinator uploads Preliminary Assignment on Canvas at the end of May. It is expected that students participate as it will be included in the final exam, but the assignment is without independent assessment and grading.
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| Expected literature | ||||||||||||||||||||||
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Mandatory readings:
John C. Hull, "Options Futures and other Derivatives", 7th-10th edition
"Good Timing: CEO Stock Option Awards and Company News Announcements", Yermack, 1997, Journal of Finance
"Do Managers Withhold Bad News?", Kothari Et al.,
Additional relevant readings:
Benninga, Mofkadi, "Financial Modeling" 5th edition, 2022
"Does the Stock Market Overreact?", De Bondt and
Thaler, 1985, the Journal of Finance
"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
“Low interest rates fuel financial risk-taking, IMF warns”,
October 16 2019, Financial Times
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