Item 69/34 - Annexure - 31
Course Code Course Title L T P C
BHUM223L Options, Futures and other Derivatives 3 0 0 3
Pre-requisite NIL Syllabus version
Course Objectives 1.0
1. To identify the basic principles of Derivatives Market
2. To define the nature of risk and identify hedging strategies
3. To describe the principles of risk management and the role of the risk manager
Course Outcomes
Upon successful completion of the course students will be able to
1. Examine the role of Risk Manager in the Financial Planning Process.
2. Analyze and evaluate various risk exposures.
3. Compare and contrast the different types of derivatives.
4. Identify the different types of options.
5. Critically evaluate Option Pricing Mechanism.
6. Explain the concept of commodity derivatives.
Module:1 Financial Risks – An Overview 7 hours
Financial Risk - Types - Market Risk - Credit Risk - Liquidity Risks -
Operational Risk - Commodity Price Risk - Trading Risk - Portfolio Risk.
Global Financial Crises and Risk Management – Hedging - Tools and Techniques.
Module:2 Derivatives 6 hours
Derivatives – definition - classification. Risk - risk management. Futures Vs.
forwards, Over the Counter (OTC) Vs. exchange traded contracts. Futures and
options on stocks, indices, commodities, exchange rates etc., understanding
quotes.
Module:3 Futures and Forwards 6 hours
Futures: Specification-spot, forward and future relationship convergence – delivery
and settlement. Margi-margin call. Hedging strategies using futures. Determination
of forward and future prices.
Module:4 Options 7 hours
Options: Mechanics of option market - option properties – Put, Call, American and
European options. Put - Call parity - underlying asset. Option pricing model: Black-
Scholes option pricing model assumptions - theoretical Vs market price – volatility -
historical and implied volatility- volatility estimation - volatility smile. Option Greeks:
Delta - delta hedging – theta – Gamma - Vega-Rho - relationship between them.
Module:5 Option Trading Strategies 5 hours
Single option strategies - Multiple option strategies – Neutral and Volatility based
strategies.
Module:6 Credit Derivatives 5 hours
Credit derivatives: Credit risk - credit default swap – Asset backed Securities –
collateralized securities. Swaps: LIBOR – interest rate swaps - currency swaps-
total return swaps – other types.
Module:7 Commodity Derivatives 7 hours
Commodity derivatives: Commodity market – commodity price risk – futures and
options on commodities – hedging using commodity derivatives.
Module:8 Contemporary Issues 2 hours
Total Lecture Hours 45 hours
Text Book(s)
Proceedings of the 69th Academic Council (16.03.2023) 248
Item 69/34 - Annexure - 31
1. Hull, John.C and Shankarshan Basu (2022), Options, Futures and other
Derivatives, Pearson, 11th Edition
2. Don M Chance, Robert Brooks and Sanjay Dhamija (2019), An Introduction to
Derivatives and Risk Management, Cengage India, 10th Edition.
Reference Books
1. John Hull (2012), Risk Management and Financial Institutions, Wiley.
2. Robert A. Strong (2016), Derivatives An Introduction Second Edition, South-
Western.
Mode of Evaluation: CAT, Quiz, Assignment and FAT
Recommended by Board of Studies 23-02-2023
Approved by Academic Council No. 69 Date 16-03-2023
Proceedings of the 69th Academic Council (16.03.2023) 249
