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| FINA0052-1 | Financial Derivatives
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| Duration : | 30h Th |
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| Number of credits : |
| Master degree in Economics, research focus, 1st year | | 5 |
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| Master in Management Sciences, in-depth approach, 1st year | | 5 |
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| Master degree in Economics, teaching focus, 1st year | | 5 |
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| Master degree in Management, didactic approach, 1st year | | 5 |
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| Master degree in Management, professional focus in Banking and Asset Management, 1st year | | 5 |
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| Master degree in Business Engineering, professional focus in Performance Management and Control, 1st year | | 5 |
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| Master en sciences de gestion à finalité spécialisée en digital marketing and sales management, 1st year | | 5 |
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| Master degree in Economical Sciences, Professional Focus in Economic Policies and Analysis, 1st year | | 5 |
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| Master degree in Economics, professional focus in Economics and Finance, 1st year | | 5 |
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| Master degree in Business Engineering, professional focus in Financial Engineering, 1st year | | 5 |
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| Master degree in Management, professional focus in Entrepreneurship, 1st year | | 5 |
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| Master degree in Management, professional focus in Financial Analysis and Audit, 1st year | | 5 |
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| Master in Management Sciences, professional Focus, 1st year | | 5 |
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| Master degree in Economics, professional focus in Economic Analysis and Public Governance, 1st year | | 5 |
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| Master degree in Management, professional focus in Human Management and Organization, 1st year | | 5 |
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| Master in Management Engineering, professional Focus, 1st year | | 5 |
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| Master degree in Business Engineering, professional focus in Intrapreneurship, 1st year | | 5 |
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| Master degree in Management, professional focus in Management, 1st year | | 5 |
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| Master en sciences de gestion, à finalité spécialisée en marketing and strategic intelligence, 1st year | | 5 |
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| Master degree in Business Engineering, professional focus in Modelisation and Technologies, 1st year | | 5 |
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| Master degree in Management, professional focus in Social Entreprise Management, 1st year | | 5 |
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| Master degree in Management, professional focus in Strategic Intelligence and Marketing, 1st year | | 5 |
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| Master degree in Business Engineering, professional focus in Supply Chain Management, 1st year | | 5 |
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| Master degree in Business Engineering, professional focusin Performance Management Systems, 1st year | | 5 |
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| Lecturer : | Aline Muller |
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Language(s) of instruction :
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| English language |
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Organisation and examination :
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| Teaching in the second semester |
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Course contents :
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| Over the last decades, firms have been increasingly challenged by financial price risks due to unpredictable movements in exchange rates, interest rates and commodity prices. Financial markets have responded to this increase in volatility by developing a continuously growing range of financial instruments, called derivatives, as well as strategies combining these with other traditional financial instruments. As a result, derivative markets have been rapidly increasing in volume for the last decades and derivatives are today recognized as very useful corporate finance and investment tools. Not only the officially exchange traded instruments are very popular as hedging or speculative devices, but also privately arranged or Over The Counter contracts attract a wide variety of customers. Any student in Financial Economics should at least have some basic knowledge of the possible uses, users, and pricing of the most important derivative instruments. In this course we aim to provide such knowledge. At the end of the course students should feel more comfortable about this complex financial environment. |
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Learning outcomes of the course :
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| At the end of this course students will be able to
- understand how financial derivatives work as well as for what purpose they have been initially designed;
- design arbitrage and hedging strategies;
- build rational price estimates;
- develop optimal investment strategies integrating financial derivative instruments;
Specific skills and competences trained during this course. At the end of this course students will have:
- strengthened their knowledge and understanding of basic management disciplines in order to use them to perform a rigorous analysis of a management situation and provide pertinent solutions;
- gained knowledge and understanding of financial engineering and be able to mobilize them in order to solve concrete management problems or cases;
- developed their ability to speak in English;
- strengthened their capacity to research autonomously and methodically the information needed to solve a complex, transversal management problem, to perform a rigorous analysis of it and to suggest pertinent solutions;
- developed their understanding and ability of using modelization methods when seeking a solution for a concrete management problem;
- developed their capacity to design concrete solutions to a management problem, integrating a dimension of technology, innovation or production;
- developed team work abilities;
- developed their critical sense (arguing);
- strengthened their capacity for creative conception of solutions;
- strengthened their professional capacity for oral communication;
- and strengthened their professional capacity for written communication.
This course contributes to the following Intended Learning Outcomes :
ILO-1 : To strengthen knowledge and understanding of management disciplines and its legal, policy and social context ;
ILO-2 : Gaining the knowledge and understanding of one of the proposed fields of concentration or to gain deep knowledge in the field of the management being already specialized through a first University Master Degree ;
ILO-4 : To acquire the capacity to research autonomously and methodically the information needed to solve a complex, transversal management problem ;
ILO-5 : Integrate autonomously researched information, tools, knowledge and context to build and propose, either individually or as part of a team, original, creative and viable solutions to concrete complex management problems, whether real or simulated, taking into account, when necessary, the human, social and legal context ;
ILO-6 : Ability to speak 2 foreign languages: C1 in English and B2 in one other language ;
ILO-9 : Developing a critical sense (arguing) ;
ILO-11 : Creative conception of solutions ;
ILO-12 : Professional capacity for oral communication ;
ILO-13 : Professional capacity for written communication. |
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Prerequisites and co-requisites/ Recommended optional programme components :
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| The only prerequisite is a basic finance course. |
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Planned learning activities and teaching methods :
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| The course is lecture-style with discussions of problem-based assignments. To ensure well-performing tutorials the class will be divided in two or three subgroups for tutorials. Students are requested to prepare lecture and tutorial meetings (hand-ins).
During the group meetings, students will be discussing and solving assigned and non-assigned problems of the textbook. An active participation is required and will be graded. Each week students are required to hand in solutions to assigned problem sets. They are invited to work in groups (2-3 students). |
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Mode of delivery (face-to-face ; distance-learning) :
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| The course is face-to-face lecture and group-meeting style. Some topics will be handled through distance learning. |
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Recommended or required readings :
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| The required textbook that will be used throughout the course is :
- Hull, John Fundamentals of Futures and Options Markets, latest edition, Prentice-Hall.
Recommended books are:
- Cox, John C., and Mark Rubinstein, 1985, Options Markets, Prentice-Hall.
- Kolb, Robert, 2003, Futures, Options and Swaps, 4th edition, Blackwell. |
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Assessment methods and criteria :
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| The final grade will be determined by
Written exam
Ability to build rational price estimates, to identify and exploit arbitrage opportunities, to build optimal investment and hedging strategies including financial derivatives, to design sound financial decision-making in the complex financial derivative environment, to build a well-articulated comprehensive answer
80%
Problem sets
Ability to build rational price estimates, to identify and exploit arbitrage opportunities, to build optimal investment and hedging strategies including financial derivatives, to design sound financial decision-making in the complex financial derivative environment, to build a well-articulated comprehensive answer.
10%
Participation
Attending class and actively discussing material in class
10%
A minimum of 5 for the written exam is required to pass the course (If the written exam grade is below 5 -> this grade will be used as final total grade). If the written exam grade is above 5, the final grade will be determined by weighing the grades for the exam, the problem sets, and class participation.
Remark: Students are invited to keep problem solutions, case write-ups and exam writing short and to the point. Concise writing is a crucial skill for their future career in finance. |
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Work placement(s) :
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| none |
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Organizational remarks :
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| Finance is definitively an analytic field. As a consequence, this course will require students to understand models, do calculations and numerical analysis. Problem sets are to be handed in at the time and date as announced in class. The purpose of problem-based assignments is to understand issues, not to replicate answers. There are no "right answers" to the cases, only good arguments and weak arguments supporting the decision to take specific actions.
Students are expected to do their own work (or work within their group). At no time is it tolerated to use materials from former academic years or other sources. No plagiarism of any kind will be tolerated.
This course will conclude with a three-hour closed-book exam, consisting entirely of open questions. Students need only bring a non-programmable calculator and writing utensils to class. Distribution tables and formula sheet will be provided. Absences from exams are allowed only for validated medical reasons. Unexcused absences from exams will lead to a zero score in the calculation of the final grade. |
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Contacts :
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| Aline Muller, Ph.D. | Ethias Chair in Asset & Risk Management | Professor of Finance
HEC - Management School of the University of Liège (Belgium) & Maastricht University (The Netherlands)
Rue Saint Gilles 35, Bldg. N2, B-4000 Liège Belgium
tel : 0032 4 232 7435 / fax: 0032 4 232 7376 / email : aline.muller@ulg.ac.be / website: www.finance.hec.ulg.ac.be
Julien Poncelet
HEC - Management School of the University of Liège (Belgium)
Rue Saint Gilles 35, Bldg. N2, B-4000 Liège Belgium
tel : 0032 4 232 7431 / fax: 0032 4 232 7376 / email : jponcelet@ulg.ac.be / website: www.finance.hec.ulg.ac.be |
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| Items online : |
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| online notes |
The core materials for the course consist of the required textbook readings Lecture notes will be available on the course web page. Other items such as problem sets will also be available on the course web page. Some additional readings on materials related to the course over the term may be provided throughout the course via the course web page.
Please refer to LOLA to access the course web page. |
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