UNIQUE SERIES AKTU Syllabus
BMBAIFM04

Introduction to Financial Derivatives

L-T-P3-0-0 Session2026-27 (W.E.F 2024-25) TypeTheory
Appears in 1 semester

MBA Integrated · Sem 6 (Specialisation: Financial Management)

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Syllabus

5 units · 40 lecture hours
Unit1

Unit 1: Introduction to Financial Derivatives

7 hrs

Meaning and evolution of derivatives; features of forward, futures, and options contracts; types of derivative markets (exchange-traded and OTC); market participants and their roles; applications of derivatives in equity, currency, commodity, and agricultural markets; overview of derivative exchanges and regulatory framework.

Unit2

Unit 2: Forward and Futures Markets

9 hrs

Structure of forward and futures contracts; pricing of forwards and futures; cost of carry model; spot– futures price relationship; contango and backwardation; convergence of prices; basic hedging concepts using futures contracts.

Unit3

Unit 3: Options Markets and Valuation

8 hrs

Introduction to call and put options; option payoffs; intrinsic and time value of options; Binomial Option Pricing Model (basic); basic concept of volatility and option pricing inputs.

Unit4

Unit 4: Interest Rate and Credit Derivatives

8 hrs

Forward Rate Agreements (FRAs); interest rate swaps; currency swaps; Credit Default Swaps (CDS); overview of structured credit instruments; role of derivatives in global financial markets; basic understanding of financial crises linked to derivatives.

Unit5

Unit 5: Applications of Derivatives in Risk Management

8 hrs

Risk exposure in business; hedging strategies using forwards, futures, and options; commodity and currency risk management; evaluation of hedging effectiveness; real-world applications of derivatives in corporate decision-making.

Course Objectives5 points
  • To understand the fundamental concepts and structure of financial derivatives.
  • To analyse forward, futures, and option contracts and their market mechanisms.
  • To understand basic derivative pricing models and valuation concepts.
  • To apply derivatives for hedging and risk management purposes.
  • To evaluate the role of derivatives in managing financial risk exposure. Course Contents
Course Outcomes (COs)5 outcomes

After completion of the course student will be able to:

  1. CO1Explain the structure, features and functioning of forward, futures and options contracts.K2 (Understand)
  2. CO2Apply cost of carry and option valuation models to compute the fair value of derivative contracts.K3 (Apply)
  3. CO3Describe interest rate and credit derivatives and their role in managing financial risk.K2 (Understand)
  4. CO4Apply hedging strategies using futures and options to given risk exposures.K3 (Apply)
  5. CO5Apply derivative-based risk management techniques to business and trading situations.K3 (Apply)

Suggested Readings (Latest Edition)

  1. Kolb, R. W., & Overdahl, J. A. Financial Derivatives: Pricing and Risk Management. Wiley.
  2. Hull, J. C. Options, Futures and Other Derivatives. Pearson Education.
  3. Dubofsky, D. A., & Miller, T. W. Derivatives: Valuation and Risk Management. Oxford University Press.
  4. R Srivastava. Derivatives and Risk Management. Oxford University Press India.
  5. P Chandra. Financial Management: Theory and Practice. McGraw Hill Education.
  6. P. Rajib. Commodity Derivatives and Risk Management. PHI Learning.

References

  1. National Stock Exchange (NSE) Educational Resources; Bombay Stock Exchange (BSE) Learning Materials; Multi Commodity Exchange (MCX) Publications; SEBI Guidelines on Derivatives Markets.

Official AKTU syllabus

This subject is on page 49, 50 of the original AKTU PDF.

Official AKTU syllabus PDF ↗