Syllabus

LEARNING OUTCOMES

Credits: 6

Schedule: 27.02.2019 - 10.04.2019

Teacher in charge (valid 01.08.2020-31.07.2022): Sean Shin, Matti Suominen

Teacher in charge (applies in this implementation): Sean Shin, Theresa Spickers

Contact information for the course (valid 04.02.2019-21.12.2112):

Instructor: Sean Seunghun Shin (Fixed Income Part); Theresa Spickers
(Derivatives Part)

E-mail: sean.shin@aalto.fi; theresa.spickers@aalto.fi

Phone: +358-50-304-3004

Office hours: by
appointment

Lectures: Monday,
10:15 - 12:00, U4 (U142, Otakaari 1)

  Wednesday, 16:15 - 18:00, D-hall(Y122, Otakaari 1)

Exercises: Thursday, 16:15 – 18:00, U7 (U135a, Otakaari 1)

CEFR level (applies in this implementation):

Language of instruction and studies (valid 01.08.2020-31.07.2022):

Teaching language: English

Languages of study attainment: English

CONTENT, ASSESSMENT AND WORKLOAD

Content

• Valid 01.08.2020-31.07.2022:

  Main topics are arbitrage, binomial models, Black & Scholes model, extensions to Black & Scholes model, interest rate derivatives, exotic options, and issues in risk management.

• Applies in this implementation:

  This course covers key concepts in understanding derivatives and fixed income securities. During the first half, this course explores important features of fixed income markets, covers fundamental concepts about bonds and terms structure, and develops tools for the valuation and risk management of the fixed income securities. The second part of the course provides an introduction into the basic concepts of derivatives. The course introduces three types of derivatives - Options, Futures and Swap - and outlines hedging and pricing techniques.
  
  

Assessment Methods and Criteria

• Valid 01.08.2020-31.07.2022:

  1. Lectures
  2. Exercises and cases (50%)
  3. Written examination (50%). The examination will be based on the lectures, handouts and the course literature.

• Applies in this implementation:

  Grading Policy

  The final grade (0
  – 5 scale) is based on total points (max 100 points); combining assignments (30
  %) and exam (70 %) points. To pass the course, you have to get at least 40% of
  exam points, i.e. 20 points. Conditional on that, your final grade is based on
  the following scale:  

  90≤x≤100:	Final grade = 5
  80≤x<90:	Final grade = 4
  70≤x<80:	Final grade = 3
  60≤x<70:	Final grade = 2
  50≤x<60:	Final grade = 1
  0≤ x<50:	Final grade = 0, Fail

  In this course, cheating
  and/or plagiarism (such as copying assignments and/or case studies used in other
  course and/or from other students) will result in a score of zero on the
  assignments. For example, if two individuals’ assignments are identical, BOTH
  will get a zero score on the assignments. Any
  types of cheating activities during the exams will result in, at a minimum, a
  grade of “0”.

  
  

   

Workload

• Valid 01.08.2020-31.07.2022:

  Classroom hours 24 h
  Exercise hours 12 h
  Class preparation 34 h
  Exercise preparation 50 h
  Exam preparation 36 h
  Exam 3 h

• Applies in this implementation:

  Exam (70%)

  
  Assignment (30%)

  There will be assignments
  including exercises and/or cases. Detailed instructions will be announced later
  through MyCourses.

  Assignment 1: upload 06.03;
  due date 12.03

  Assignment 2: upload
  28.03; due date 04.04 

  You have an option to make a group (max 4 people
  per a group) to do the assignments
  together. One assignment per a group can be submitted and all the group
  members will get the same grade for assignments. Once you form a group and
  submit an assignment together, you have to maintain the group throughout the
  course.

  The deadline is strict. Late
  submission will be NOT allowed.
  

DETAILS

Study Material

• Valid 01.08.2020-31.07.2022:

  Recommended text for fixed income part: Handbook of Fixed Income Securities by Pietro Veronesi
  Recommended text for the derivatives part: Options, Futures, and Other Derivatives by John C. Hull

  Other material distributed by the lecturer.

• Applies in this implementation:

  Course Material

  The main reference for this course will be the class slides, which will be posted on MyCourses. The readings and other materials will also be provided through MyCourses. The exam will cover all materials and papers that appeared in the lecture notes.

  Recommended text for fixed income part: “The Handbook of Fixed Income Securities” by Frank
  J. Fabozzi and Steven V. Mann, 8th Edition 

  Recommended text for the derivatives part: “Options, Futures, and Other Derivatives” by John C. Hull

  
  
  

Substitutes for Courses

• Valid 01.08.2020-31.07.2022:

  Substitutes a course 28C00400 Derivatives and Risk Management. It is possible to include only one of these courses into the degree.

Prerequisites

• Valid 01.08.2020-31.07.2022:

  Rahoituksen perusteet or Principles of Corporate Financial Management

SDG: Sustainable Development Goals

1 No Poverty

8 Decent Work and Economic Growth

FURTHER INFORMATION

Details on the schedule

• Applies in this implementation:

  Schedule and Contents

  Note:
  Contents are tentative and are subject to change.

   

  #1.
  Course Orientation and Introduction to Fixed Income Markets
  
  27.2, Wed

  #2.
  Bond Pricing: Basic concepts
  
  4.3, Mon

  #3.
  Bond Pricing: Duration and convexity
  6.3,
  Wed  

  #4.Yield Curve and Term Structure
  11.3, Mon  

  #5.
  Fixed Income Investment Strategies
  
  13.3, Wed

  #6.
  General Introduction to Derivatives, Introduction to Futures and Futures
  Pricing
  18.3,
  Mon

  #7.
  Options and Option Strategies
  
  20.3, Wed

  #E1.
  Exercise Session 1
  21.3,
  Thu

  #8.
  Options and Option Strategies – continued
  
  25.3, Mon

  #9.
  Option Pricing – Binomial Trees
  
  27.3, Wed

  #E2.
  Exercise Session 2
  28.3,
  Wed

  #10.
  Option Pricing – Black-Scholes and Greeks
  
  1.4, Mon

  #11.
  Securitization and the Credit Crisis of 2007
  
  3.4, Wed