Derivatives and Risk Management

BUAD 508
Mason School of Business, Fall 2014


Professor Contact Info: Dr. Vladimir Atanasov
3088 Miller Hall
757-221-2954
vladimir.atanasov@mason.wm.edu

Office Hours: By appointment


Course Outline
This course is designed to introduce students to financial derivatives and commonly used
techniques for risk management. The course will focus on the basic valuation and use of
forwards, futures, swaps, and options. Following the introduction of all major classes of
financial derivatives, students will learn how to value executive options and judge the
effectiveness of various hedging strategies using derivatives. The course will conclude with a
discussion of the methodology behind Value-at-Risk, a popular measure of risk for financial
institutions. The accounting treatment of many of the topics presented in this class will be
covered in subsequent accounting classes.


Optional Textbook
Fabozzi, Frank, 2011, Bond Markets, Analysis and Strategies, 8
th
edition, Prentice Hall.
The same textbook is used in BUAD 507. Older editions dating back to 2005 will be more than
adequate.

Course Grade
Final Exam 45 %
Group Homeworks 30 %
Participation and Professionalism 25 %

The final exam will be take-home, 30% multiple choice questions and 70% problems.
There will be three group homeworks, each worth 10% of the grade. There will be an
opportunity for an extra credit assignment to compensate for lack of participation in the class.

Key Date
Take-home Final Due 1 p.m., Wednesday, October 8


Course Outline:
Class
No
Date Topic
1 August 18 Introduction
Forwards and Futures
2 August 20 Forwards and Futures
3 August 25 Eurodollar Deposit Futures and
Stock Index Futures
4 August 27 Finish Futures
5 September 1 Interest Rate Swaps I: Contract
Specifications
6 September 3 Interest Rate Swaps II: Valuation
7 September 8 Finish Interest Rate Swaps
8 September 10 Basics of Options. Put-Call Parity
9 September 15 Option Valuation: the Binomial
Model
10 September 17 Using the Black-Scholes Option
Pricing Model
11 September 22 Valuing Employee Stock Options
12 September 24 Hedge Effectiveness
13 September 29 Introduction to Value-at-Risk
14 October 1 Review of final exam material. Final
exam distributed



William & Mary MAcc Policy on Cell Phone and Computer usage in Class

Please keep in mind that we are in a group setting. Actions that may otherwise be relatively
innocuous can be very disruptive in a group setting, so please conduct yourself in a manner that
demonstrates respect for your classmates. Personal use of computers during class (e.g., checking
e-mail; surfing) infringes on the ability of your classmates to learn. Out of courtesy for your
classmates, please turn your computer off at the beginning of class unless the computer is
required for a class related activity. In the circumstances where the use of computers in class is
appropriate, the internet, email, and any messaging software should remain off. In addition, all
cell phones, smart phones, and other similar devices should be turned off at the beginning of
class. The penalty for using these devices during class or for personal use of computers during
class will be determined by the individual professor.