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Financial Derivatives syllabus

BNK 2028 units · 45 topicsAcademic year 2083/84
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Financial Derivatives

8 units

1. Introduction (5 LHs)

  1. Derivative markets and instruments
    1. Derivative markets and instruments
  2. Core concepts in financial and derivative markets
    1. Core concepts in financial and derivative markets
  3. Spot and derivative markets
    1. Spot and derivative markets
  4. Role of the derivative market
    1. Role of the derivative market
  5. Criticism of derivative markets
    1. Criticism of derivative markets
  6. Misuse of derivatives
    1. Misuse of derivatives
  7. Derivatives and ethics
    1. Derivatives and ethics
  8. Career in derivative markets
    1. and Career in derivative markets.

2. Structure of Options Markets (7 LHs)

  1. Development of options markets
    1. Development of options markets
  2. Call and put options
    1. Call and put options
  3. Payoff and profit diagrams of stock transactions and options transactions
    1. Payoff and profit diagrams of stock transactions and options transactions
  4. Over-the-counter options market
    1. Over-the-counter options market
  5. Exchange-listed options trading
    1. Exchange-listed options trading
  6. Mechanisms of trading
    1. Mechanisms of trading
    2. Option quotation
    3. Types of options
  7. Transaction costs in options trading
    1. Transaction costs in options trading.

3. Valuation of Option (8 LHs)

  1. Principles of call option and put option pricing
    1. Principles of call option and put option pricing
  2. One-period binomial model
    1. One-period binomial model: valuation of call, valuation of put, hedge portfolio, arbitrage
  3. Two-period Binomial model
    1. Two-period Binomial model: valuation of call and put, American options, and dividend adjustment
  4. The Black-Scholes-Merton model of option pricing with and without dividends
    1. The Black-Scholes-Merton model of option pricing with and without dividends
  5. The effect of change in variables on option value
    1. The effect of change in variables on option value.

4. Option Strategies (8 LHs)

  1. Call and stock
    1. Call and stock: the covered call
  2. Put and stocks
    1. Put and stocks: the protective put
  3. Option combination
    1. Option combination: straddle, strangle, strip, and strap
  4. Spread strategies
    1. Spread strategies: bull spread, bear spread, and butterfly spread
  5. Synthetic instruments
    1. Synthetic instruments.

5. Structure of Future Market (5 LHs)

  1. Development of forward and future markets
    1. Development of forward and future markets
  2. Over-the-counter forward market
    1. Over-the-counter forward market
  3. Organized future trading
    1. Organized future trading
    2. Future traders
  4. Mechanics of futures trading
    1. Mechanics of futures trading
  5. Types of future contract
    1. Types of future contract
  6. Transaction costs in forward and futures trading
    1. Transaction costs in forward and futures trading
  7. Regulation of futures and forward markets
    1. and Regulation of futures and forward markets
  8. Development of derivative market in Nepal
    1. Development of derivative market in Nepal
  9. Regulation of derivative markets in Nepal
    1. Regulation of derivative markets in Nepal
  10. Current issues in derivative markets of Nepal
    1. Current issues in derivative markets of Nepal.

6. Pricing and Valuation of Forward and Future (5 LHs)

  1. Cost of carry principle
    1. Cost of carry principle
  2. Pricing futures/forwards on investment assets
    1. Pricing futures/forwards on investment assets, stock indices, foreign currencies, and commodities
  3. Carry arbitrage when futures/forwards are mispriced
    1. Carry arbitrage when futures/forwards are mispriced.

7. Swaps (5 LHs)

  1. Concept and nature
    1. Concept and nature
    2. Features of swaps
  2. Introduction, pricing, and valuation of interest rate swaps, currency swaps, and equity swaps
    1. Introduction, pricing, and valuation of interest rate swaps, currency swaps, and equity swaps.

8. Financial Risk Management (5 LHs)

  1. Rationale for risk management
    1. Rationale for risk management
  2. Hedging of equity risk and currency risk using options
    1. Hedging of equity risk and currency risk using options
  3. Managing risk using forward and futures
    1. Managing risk using forward and futures
  4. Basis risk and imperfect hedge
    1. Basis risk and imperfect hedge
  5. Managing interest rate risk, currency risk, and portfolio risk by using swaps
    1. Managing interest rate risk, currency risk, and portfolio risk by using swaps.