FIN 580: Derivatives I – Basic Strategies and Pricing

This course deals with different derivatives. The functioning of various derivative instruments like forwards, futures, swaps, and options will be explained. Furthermore, derivatives strategies will be analyzed. A particular focus of the course is the valuation of different basic and exotic instruments. The theoretical basis will be presented in lectures, while exercise classes will provide the opportunity to apply the concepts in practice. For HWS 2022/23 only, we will offer this course as an "inverted classroom" where lectures will be provided as videos in advance and we will summarize the respective topics and discuss the content during the lecture hours. Students are required to study the videos before the lectures.

Learning outcomes
After the completion of this course, students will have gained a thorough understanding of the spectrum of derivative financial instruments and their functioning. Furthermore, they will have learned how to implement investment strategies using derivatives. Students acquire a working knowledge of different valuation techniques, which is a necessary condition for trading these instruments and which also allows them to price new innovative products themselves.

Necessary prerequisites

Recommended prerequisites
Students should have successfully completed the Mannheim Bachelor finance modules (or equivalent courses). They should have an understanding of simple derivatives and basic pricing techniques on a Bachelor level before taking this course! A working knowledge of basic mathematics (analysis and optimization) and statistics (expected values, variances, covariances) is required.

Contact hoursIndependent study time
Lecture2 SWS9 SWS
Exercise class1 SWS5 SWS
Form of assessmentWritten exam (60 min.)
Restricted Admissionno
Further information
Performing lecturer
Prof. Dr. Stefan Ruenzi
Prof. Dr. Stefan Ruenzi (Lecture Videos), Santanu Kundu (Lecture & Exercise Classes), Kai Maeckle (Exercise Classes)
OfferingFall semester
Duration of module 1 semester
Range of applicationM.Sc. MMM, M.Sc. WiPäd, M.Sc. VWL, M.Sc. Wirt. Inf., M.Sc. Wirt. Math., MAKUWI
Preliminary course work
Program-specific Competency GoalsCG 1
Graded yes
LiteratureHull, J. (2016): Fundamentals of Futures and Options Markets (9th Edition)
Chance, D. M. & Brooks, R. M. (2015): Introduction to Derivatives and Risk Management (10th edition)
McDonald, R. M. (2008): Fundamentals of Derivatives Markets (International edition)
Course outlineChapter 1: Introduction
Chapter 2: Trading Strategies
Chapter 3: Forwards
Chapter 4: Futures,
Chapter 5: Swaps,
Chapter 6: Options,
Chapter 7: Impact of Derivatives on Markets & the Macroeconomy