| School/Faculty/Institute |
Faculty of Engineering |
| Course Code |
IE 431 |
| Course Title in English |
Introduction to Financial Engineering |
| Course Title in Turkish |
Finans Mühendisliğine Giriş |
| Language of Instruction |
EN |
| Type of Course |
Flipped Classroom,Lecture |
| Level of Course |
Introductory |
| Semester |
Spring,Fall |
| Contact Hours per Week |
| Lecture: 3 |
Recitation: none |
Lab: none |
Other: none |
|
| Estimated Student Workload |
148 hours per semester |
| Number of Credits |
6 ECTS |
| Grading Mode |
Standard Letter Grade
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| Pre-requisites |
MATH 104 - Mathematics for Social Sciences II | MATH 116 - Calculus II
|
| Expected Prior Knowledge |
Basic quantitative skills |
| Co-requisites |
None |
| Registration Restrictions |
none |
| Overall Educational Objective |
To learn what derivative securities are, how they are valued and how they can be used in both financial risk management and in trading. |
| Course Description |
The aim of this course is to provide the students with a comprehensive introduction to derivative securities and their application in financial engineering. The course will cover; what forwards, futures, options and swaps are; how they can be used as risk transferring/minimizing devices (hedging); how they can be used to create additional value to firms (trading); and how they are valued (pricing and marking to market).
Cost of carry valuation model for forwards/futures, binomial pricing for options, dynamic delta hedging, the Black Scholes formula, Greek letters (delta, gamma, vega, theta) and value at risk (VaR) will also be introduced.
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| Course Description in Turkish |
Bu dersin amacı, öğrencilere, türev ürünlerin ne olduğu ve bu ürünlerin finansal mühendislik alanında nasıl kullanıldığını göstermektir. Ders; vadeli alım/satım sözleşmelerinin (forwards ve futures), opsiyonların ve para takas sözleşmelerinin (swap) tanıtımını; bu ürünlerin finansal riskleri transfer etmek veya azaltmak için nasıl kullanılabileceğini; bu ürünlerin ilave değer yaratmak maksadıyla alım satım işlemlerinde nasıl kullanılabileceğini (trading); ve bu ürünlerin nasıl değerleneceğini (pricing and marking to market) kapsamaktadır.
Forward ve futures sözleşmeleri için taşıma maliyeti değerleme yöntemi, opsiyonlar için binom fiyatlama, dinamik delta hedging, Black Scholes formülleri, Greek harfleri (delta, gamma, vega, theta) ve riske maruz değer (VaR) konuları da işlenecektir.
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Course Learning Outcomes and Competences
Upon successful completion of the course, the learner is expected to be able to:
1) describe the nature of and apply valuation methods for forwards, futures and swaps;
2) explain how to manage interest rate and foreign exchange risk via forwards, futures and swaps;
3) identify the characteristics and uses of options;
4) apply option strategies for trading and risk management purposes;
5) identify and analyze the influence of determinants of the value of options;
6) construct Black Scholes and Binomial option pricing methods;
7) apply delta hedging and value at risk concepts.
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| Program Learning Outcomes/Course Learning Outcomes |
1 |
2 |
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5 |
6 |
7 |
| 1) An ability to identify, formulate, and solve complex engineering problems by applying principles of engineering, science, and mathematics |
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| 2) An ability to apply engineering design to produce solutions that meet specified needs with consideration of public health, safety, and welfare, as well as global, cultural, social, environmental, and economic factors |
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| 3) An ability to communicate effectively with a range of audiences |
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| 4) An ability to recognize ethical and professional responsibilities in engineering situations and make informed judgments, which must consider the impact of engineering solutions in global, economic, environmental, and societal contexts |
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| 5) An ability to function effectively on a team whose members together provide leadership, create a collaborative and inclusive environment, establish goals, plan tasks, and meet objectives |
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| 6) An ability to develop and conduct appropriate experimentation, analyze and interpret data, and use engineering judgment to draw conclusions |
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| 7) An ability to acquire and apply new knowledge as needed, using appropriate learning strategies. |
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Relation to Program Outcomes and Competences
| N None |
S Supportive |
H Highly Related |
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Program Outcomes and Competences |
Level |
Assessed by |
| 1) |
An ability to identify, formulate, and solve complex engineering problems by applying principles of engineering, science, and mathematics |
S |
Exam,HW,Participation
|
| 2) |
An ability to apply engineering design to produce solutions that meet specified needs with consideration of public health, safety, and welfare, as well as global, cultural, social, environmental, and economic factors |
N |
|
| 3) |
An ability to communicate effectively with a range of audiences |
N |
|
| 4) |
An ability to recognize ethical and professional responsibilities in engineering situations and make informed judgments, which must consider the impact of engineering solutions in global, economic, environmental, and societal contexts |
N |
|
| 5) |
An ability to function effectively on a team whose members together provide leadership, create a collaborative and inclusive environment, establish goals, plan tasks, and meet objectives |
N |
|
| 6) |
An ability to develop and conduct appropriate experimentation, analyze and interpret data, and use engineering judgment to draw conclusions |
S |
Exam,HW,Participation
|
| 7) |
An ability to acquire and apply new knowledge as needed, using appropriate learning strategies. |
N |
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| Prepared by and Date |
HANDE KÜÇÜKAYDIN , March 2024 |
| Course Coordinator |
HANDE KÜÇÜKAYDIN |
| Semester |
Spring,Fall |
| Name of Instructor |
Öğr. Gör. AHMET AKÇA |
Course Contents
| Week |
Subject |
| 1) |
Introduction to Derivatives – Chapter 1 |
| 2) |
Mechanics of Forwards and Futures – Chapters 2 and 5 |
| 3) |
Hedging Strategies using Forwards and Futures – Chapter 3 |
| 4) |
Hedging Strategies using Forwards and Futures – Chapter 4 |
| 5) |
Hedging Strategies using Forwards and Futures – Chapter 6 |
| 6) |
Swaps – Chapter 7 |
| 7) |
Mechanics of Options – Chapter 10 |
| 8) |
Properties of Stock Options – Chapter 11 |
| 9) |
Trading Strategies involving Options – Chapter 12 |
| 10) |
Binomial Trees – Chapter 13 |
| 11) |
The Black Scholes Merton Model – Chapter 15 |
| 12) |
Greek Letters – Chapter 19 |
| 13) |
Volatility Smiles – Chapter 20 |
| 14) |
Value at Risk – Chapter 22 |
| 15) |
Final Exam/Project/Presentation period |
| 16) |
Final Exam/Project/Presentation period |
| Required/Recommended Readings | Required: Fundamentals of Futures and Option Markets, John C. Hull, 9th Edition, Pearson
Optional: Options, Futures and Other Derivatives, John C. Hull, 9th Edition, Pearson
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| Teaching Methods | Lectures/contact hours using “flipped classroom” as an active learning technique |
| Homework and Projects | Homeworks |
| Laboratory Work | none |
| Computer Use | Compulsory to bring calculators to the classes and exams. Exchange of calculators are not allowed during exams. Optional to bring a notebook as MS Excel might be used during classes. |
| Other Activities | none |
| Assessment Methods |
| Assessment Tools |
Count |
Weight |
| Attendance |
14 |
% 10 |
| Quiz(zes) |
4 |
% 15 |
| Homework Assignments |
5 |
% 20 |
| Midterm(s) |
1 |
% 25 |
| Final Examination |
1 |
% 30 |
| TOTAL |
% 100 |
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| Course Administration |
akcaa@mef.edu.tr, ahmetakca@gmail.com
Instructor’s office and phone number: TBD
office hours: Appointment by e-mail
email address: akcaa@mef.edu.tr, ahmetakca@gmail.com
Missing a quiz: Provided that proper documents of excuse are presented, each missed quiz by the student will be given a grade by taking the average of all of the other quizzes. No make-up will be given.
Missing a project: Project deadlines are always extendable up to 24 hours, 10% of total attainable score will be deducted from late submissions
Missing a midterm: Provided that proper documents of excuse are presented, each missed midterm by the student will be given the grade of the final exam. No make-up will be given.
Missing a final: Faculty regulations.
A reminder of proper classroom behavior, code of student conduct: YÖK Regulations Academic dishonesty and plagiarism: YÖK Regulations
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Information Package / Course Catalogue