| 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
|
| Pre-requisites |
MATH 104 - Mathematics for Social Sciences II | MATH 116 - Calculus II
|
| Co-requisites |
None |
| Expected Prior Knowledge |
Basic quantitative skills |
| 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.
|
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.
|
| Program Learning Outcomes/Course Learning Outcomes |
1 |
2 |
3 |
4 |
5 |
6 |
7 |
Relation to Program Outcomes and Competences
| N None |
S Supportive |
H Highly Related |
| |
|
|
| |
Program Outcomes and Competences |
Level |
Assessed by |
| 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
|
| 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 |
% 20 |
| Homework Assignments |
5 |
% 15 |
| Midterm(s) |
1 |
% 25 |
| Final Examination |
1 |
% 30 |
| TOTAL |
% 100 |
|
| 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
|