International Finance
Bachelor	TR-NQF-HE: Level 6	QF-EHEA: First Cycle	EQF-LLL: Level 6

General course introduction information

Course Code:

FNS403

Course Name:

Derivatives Markets and Risk Management

Course Semester:

Fall

Course Credits:

Theoretical	Practical	Credit	ECTS
3	0	3	6

Language of instruction:

Course Requisites:

Does the Course Require Work Experience?:

Type of course:

Compulsory

Course Level:

Bachelor

TR-NQF-HE:6. Master`s Degree

QF-EHEA:First Cycle

EQF-LLL:6. Master`s Degree

Mode of Delivery:

Face to face

Course Coordinator :

Prof. Dr. GÖKÇE TUNÇ

Course Lecturer(s):

Prof. Dr. GÖKÇE TUNÇ

Course Assistants:

Course Objective and Content

Course Objectives:

The main objective of this course is to introduce the topics of specification of derivative instruments; market risk; counterparty risk; mechanics of futures markets; stock index futures, commodity futures; interest rate futures; hedging strategies using derivatives; determination of forward and futures prices; swaps; mechanics of options markets; properties of stock options; trading strategies involving options; binomial trees; Black-Scholes-Merton model.

Course Content:

Specification of derivative instruments; market risk; counterparty risk; mechanics of futures markets; stock index futures, commodity futures; interest rate futures; hedging strategies using derivatives; determination of forward and futures prices; swaps; mechanics of options markets; properties of stock options; trading strategies involving options; binomial trees; Black-Scholes-Merton model.

Learning Outcomes

The students who have succeeded in this course;

Learning Outcomes

1 - Knowledge
Theoretical - Conceptual
1) • Explain how derivative products work and how they are used in financial risk management,
2) • Explain how derivative instruments are priced and derive some important general results on the relationship between forward and spot prices.
3) • Present how financial institutions hedge their risks when they trade these products
4) • Apply the strategies of derivative products in the business life.
2 - Skills
Cognitive - Practical
3 - Competences
Communication and Social Competence
Learning Competence
Field Specific Competence
Competence to Work Independently and Take Responsibility

Lesson Plan

Week	Subject	Related Preparation
1)	• Introduce the markets for futures, forward, and options contracts • Explain the activities of hedgers, speculators, and arbitrageurs • Discuss the growing importance of derivatives • Discuss issues such as the relationship between a futures price and the corresponding spot price, the desirability of options being exercised early, why most options sell for more than their intrinsic value • Discuss how arbitrage arguments tie the futures price of gold to its spot price and why the futures price of a consumption commodity such as oil is not tied to its spot price in the same way • What is a derivative? • Why Derivatives Are Important? • How Derivatives are Used? • Exchange-traded markets • Over-the counter markets • Forward Price • Profit from a Long and Short Forward Position • Futures Contracts • Arbitrage opportunities • Options • Types of Traders • Ethical issues about derivative products	none
2)	• Cover the details of how futures markets work • Examine issues such as specification of contracts, the operation of margin accounts, the organization of exchanges, the regulation of markets, the way in which quotes are made, and the treatment of futures transactions for accounting purposes. • Compare futures contracts with forward contracts • Explain the difference between the payoffs realized from futures contracts and forward contracts. • Background of futures markets • Specification of a futures contract • Convergence of futures price to spot price • The operation of margins • OTC markets • Market quotes • Types of traders and types of orders	Read chapter 2 from Options, Futures, and Other Derivatives, 9/E, John C Hull, Pearson and be prepared to discuss in class. Solve problems 1.6,1.8,1.13 and 1.15 on page 18-19 and submit the solutions next week.
3)	• Explain a number of general issues associated with the way hedges are set up • Discuss various ways in which a company can take a positon in futures contracts to offset an exposure to the price of an asset • Discuss a number of theoretical and practical reasons why companies do not hedge • Define basis risk • Compute optimal hedge ratio • Explain the features of stock index futures • Basic principles of hedging strategies using futures • Arguments for and against hedging • Basis risk • Cross hedging • Stock index futures	Read chapter 3 from Options, Futures, and Other Derivatives, 9/E, John C Hull, Pearson and be prepared to discuss in class. Solve problems 2.3, 2.4 and 2.15 on page 43-44 and submit the solutions next week.

Sources

Course Notes / Textbooks:	Options, Futures, and Other Derivatives John C Hull Pearson, 9th edition,2014 ISBN-13: 978-0133456318
References:	Options, Futures, and Other Derivatives John C Hull Pearson, 9th edition,2014 ISBN-13: 978-0133456318

Course-Program Learning Outcome Relationship

Learning Outcomes	1	2	3	4
Program Outcomes
1) Explain the essential body of knowledge in the area of banking and insurance, including evolution of the discipline, the state-of-the-art concepts, scientific methodology, theories and models.
1) -explain the essential body of knowledge in the area of banking and insurance, including evolution of the discipline, the state-of-the-art concepts, scientific methodology, theories and models.
2)  employ the appropriate tools and analytical techniques to collect and analyze quantitative and qualitative data in the related areas, interpret results and propose solutions.
2) Employ the appropriate tools and analytical techniques to collect and analyze quantitative and qualitative data in the related areas, interpret results and propose solutions.
3)  recognize and assess legal environment in banking and insurance industries
3) Recognize and assess legal environment in banking and insurance industries.
4) Explain ongoing operational and managerial methods in banking and insurance industries.
4)  explain ongoing operational and managerial methods in banking and insurance industries.
5) Discover and create entrepreneurial opportunities and expertise to successfully establish and develop their own ventures.
5)  discover and create entrepreneurial opportunities and expertise to successfully establish and develop their own ventures.
6)  develop the capacity to assess current global economic issues.
6) Develop the capacity to assess current global economic issues.
7)  express he role of international capital markets in the global economy; accordingly define the concept of risk in terms of measurement and management.
7) Translate and explain the content of the documents written in English related to the field .
8)  translate and explain the content of the documents written in English related to the field .
8) Express he role of international capital markets in the global economy; accordingly define the concept of risk in terms of measurement and management.
9) Identify standards of personal, professional, social and business ethics, evaluate the ethical implications of various practices in the related areas, and be aware the importance of ethical behavior in adding value to the society.
9)  identify standards of personal, professional, social and business ethics, evaluate the ethical implications of various practices in the related areas, and be aware the importance of ethical behavior in adding value to the society.

Course - Learning Outcome Relationship

No Effect	1 Lowest	2 Low	3 Average	4 High	5 Highest

	Program Outcomes	Level of Contribution
1)	Explain the essential body of knowledge in the area of banking and insurance, including evolution of the discipline, the state-of-the-art concepts, scientific methodology, theories and models.
1)	-explain the essential body of knowledge in the area of banking and insurance, including evolution of the discipline, the state-of-the-art concepts, scientific methodology, theories and models.
2)	 employ the appropriate tools and analytical techniques to collect and analyze quantitative and qualitative data in the related areas, interpret results and propose solutions.
2)	Employ the appropriate tools and analytical techniques to collect and analyze quantitative and qualitative data in the related areas, interpret results and propose solutions.
3)	 recognize and assess legal environment in banking and insurance industries
3)	Recognize and assess legal environment in banking and insurance industries.
4)	Explain ongoing operational and managerial methods in banking and insurance industries.
4)	 explain ongoing operational and managerial methods in banking and insurance industries.
5)	Discover and create entrepreneurial opportunities and expertise to successfully establish and develop their own ventures.
5)	 discover and create entrepreneurial opportunities and expertise to successfully establish and develop their own ventures.
6)	 develop the capacity to assess current global economic issues.
6)	Develop the capacity to assess current global economic issues.
7)	 express he role of international capital markets in the global economy; accordingly define the concept of risk in terms of measurement and management.
7)	Translate and explain the content of the documents written in English related to the field .
8)	 translate and explain the content of the documents written in English related to the field .
8)	Express he role of international capital markets in the global economy; accordingly define the concept of risk in terms of measurement and management.
9)	Identify standards of personal, professional, social and business ethics, evaluate the ethical implications of various practices in the related areas, and be aware the importance of ethical behavior in adding value to the society.
9)	 identify standards of personal, professional, social and business ethics, evaluate the ethical implications of various practices in the related areas, and be aware the importance of ethical behavior in adding value to the society.

Learning Activity and Teaching Methods

Individual study and homework
Lesson
Group study and homework
Homework
Project preparation

Assessment & Grading Methods and Criteria

Written Exam (Open-ended questions, multiple choice, true-false, matching, fill in the blanks, sequencing)
Homework
Individual Project
Presentation
Staj/ Yerinde Uygulama Değerlendirmesi

Assessment & Grading

Semester Requirements	Number of Activities	Level of Contribution
Quizzes	1	% 15
Homework Assignments	1	% 15
Final	1	% 70
total		% 100
PERCENTAGE OF SEMESTER WORK		% 30
PERCENTAGE OF FINAL WORK		% 70
total		% 100

Workload and ECTS Credit Grading

Activities	Number of Activities	Workload
Course Hours	16	48
Study Hours Out of Class	16	64
Project	1	6
Homework Assignments	5	10
Quizzes	2	1
Midterms	1	15
Final	1	22
Total Workload		166