Financial Derivatives -FIN 371

Second Semester-2021

Submission -Week 14- 19th April 2021

Project Analysis

The learning objective:

Derivative Instruments

The hedging strategies

Pricing of futures and options

The evaluation criteria for the project report:-

Project Guidelines:-

6 marks

1. Step 1: The derivatives trading is an important economic activity globally. Substantiate

with the help of qualitative and quantitative data and their analysis from Bloomberg

Terminal.

2. Statistical data showing and explaining the nature of derivative trading across the globe.

3. The impact of derivative trading on the financial development of the world.

Step 2: Prepare a report on the following sub-headings:

1. When was derivative trading introduced in KSA.

2. What were the objectives of this great initiative?

3. What impact it could create on to the MENA region.

4 mark

Step 3: Elaborate on the various initiatives, policies and developments taken place in Saudi

Derivative Markets since Aug 2020. The information and its analysis can be presented by the

teams in a creative and innovative manner. 5 marks

Step 4: Bloomberg Saudi Arabia March Economic Survey- analysis 5 marks

Step 5: Pricing of futures- historical data analysis 10 marks

Theoretical

Future Price

Actual

Future

Price

Spot

Price

Arbitrage

Opportunities

in the market

Step 6: Pricing of Options- Strike price, Market Price, Intrinsic Value, Time value, Option

Premium analysis. In the money, At the money, Out of the money 10 marks

Call

Option

Strike

Price

Market

Price

Intrinsic

Value

Time

Value

Option

Premium

Put

Option

Step 7: Application of Bloomberg tools: OVME, OVML, FXFA – futures and options trading

( eurusd currency, GCI gold futures) 10 marks

Criteria

Excellent

( 1 )

Very Good

( 0.75)

Good

( 0.5)

Poor

(0.25)

No Evidence (0)

1. The

derivatives trading

is an important

economic activity

globally.

Substantiate with

the help of

qualitative and

quantitative data

and their analysis

from Bloomberg

Terminal.

2. Statistical

data showing and

explaining the

nature of

derivative trading

across the globe.

3. The

impact of

derivative trading

on the financial

development of the

world.

The student

shows (100%)

ability of

acquiring

information

using Bloomberg

Terminal related

to derivative

trading at global

level)

The student

shows (75%)

ability of

acquiring

information

using

Bloomberg

Terminal

related to

derivative

trading at global

level)

The student

shows (50%)

ability of

acquiring

information

using

Bloomberg

Terminal

related to

derivative

trading at

global level)

The student

shows (25%)

ability of

acquiring

information

using

Bloomberg

Terminal

related to

derivative

trading at

global level)

The student lacks

ability of

acquiring

information using

Bloomberg

Terminal related

to derivative

trading at global

level)

Score 6 marks 3 2.25 1.50 0.75 0

1. When was

derivative trading

introduced in

KSA.

2. What

were the objectives

of this great

initiative?

3. What

impact it could

create on to the

MENA region.

The student

shows (100%)

skills to diagnose

the objectives

behind the

introduction of

derivative trading

in KSA and its

impact on

MENA region.

The student

shows (75%)

skills to

diagnose the

objectives

behind the

introduction of

derivative

trading in KSA

and its impact

on MENA

region.

The student

shows (50%)

skills to

diagnose the

objectives

behind the

introduction of

derivative

trading in KSA

and its impact

on MENA

region.

The student

shows (25%)

skills to

diagnose the

objectives

behind the

introduction

of derivative

trading in

KSA and its

impact on

MENA

region.

The student

shows poor/no

analytical skills

skills to diagnose

the objectives

behind the

introduction of

derivative trading

in KSA and its

impact on

MENA region.

Score

4 mark 4.00 3.00 2.00 1.00 0.00

Quality of

information are

accurate and

updated

The student

demonstrates

well the ability

(100%) to

understand and

complete the

information

required

The student

demonstrates

the ability

(75%) to

understand and

complete the

information

required

The student

demonstrates

the ability (50

%) to

understand and

complete the

information

required

The student

demonstrates

the ability (25

%) to

understand

and complete

the

information

required

Does not

understand and

complete the

information

required

Score

5 marks 5.00 3.75 2.5 1.25 0

Step 5,6,7

The student

shows (100%)

ability to explain

in her own

words, analyse

and interpret the

option pricing

analysis, future

pricing analysis.

The student

shows (75%)

ability to

explain in her

own words,

analyse and

interpret the

option pricing

analysis, future

pricing analysis.

The student

shows (50%)

ability to

explain in her

own words,

analyse and

interpret the

option pricing

analysis, future

pricing

analysis.

The student

shows (25%)

ability to

explain in her

own words,

analyse and

interpret the

option pricing

analysis,

future pricing

analysis.

The student lacks

the ability to

explain in her

own words,

analyse and

interpret the

option pricing

analysis, future

pricing analysis.

10 marks 10 7.5 5.0 2.50 0

Criteria

Excellent

( 1 )

Very Good

(0.75)

Good

(0.5)

Poor

(0.25)

No Evidence

(0)

Organization and Style (10 marks)

References

(APA)-

Prior work is

100%

acknowledged

by referring to

sources for

theories,

assumptions,

quotations, and

findings.

All references and citations are

correctly written

and present.

With an

occasional

oversight,

prior work is

75%

acknowledge

d by

referring to

sources for

theories,

assumptions,

quotations, and

findings.

One or two reference or

citations

missing or

incorrectly

written

On 50%

several

instances,

references are

not stated

when

appropriate.

Three or

more reference or

citations

missing or

incorrectly

written

Little 25%

attempt is

made to

acknowled

ge the work

of others.

Most

references

that are

included are

inaccurate or

unclear.

Several references or

citations

missing or

incorrectly

written.

No evidence

0% that

acknowledge

the work of

others. All

references that

are included are

inaccurate or

unclear.

Reference

and citation

errors detract

Significantly

from paper.

Score 1 mark 1 0.75 0.50 0.25 0

Cover Page

Font type: Times

New Roman, Size

12,

Spacing 1.5

University logo

College Name

Department Name

Section No

Name of Instructor

Students name and

IDs

Case has 6 or

more errors.

No formatting

applied

No structure,

Unorganized

format

Case has 5- 6

errors.

Only Few

formatting rules

applied.

Somewhat

Structured but

lacking coherent

sequence of

information

details

Case has 3-4

errors.

Only some

formatting rules

applied.

Structured with

partially flow of

information

details

Case has 1-2

errors.

Most of the

formatting

rules applied.

One -Two

aspect missing

Structured with

good flow of

information

details

Case is free of

errors.

All formatting rules

applied

Well-arranged

structured and

coherent

information details

Appropriate

formatting rules &

Front Page

Font type: Times

New Roman, Size

12,

Spacing 1.5

University logo

College Name Department Name

Section No

Name of Instructor

Students name and

IDs.

All formatting

rules applied.

Well-arranged

structured with

coherent

information

details

Most of the

formatting

rules applied.

One or two

aspect missing.

Structured

front page with

good flow of

information

details

Only some

formatting

rules applied.

Somewhat

structured

Front page

with partially

flow of

information

details

Only few

formatting

rules applied.

Somewhat

structured

Front page

but lacking

coherent

sequence of

information

details

No formatting

applied, No

Front page, No

information

details

Score 1 mark 1 0.75 0.50 0.25 0

Table of Content

Serial no

Heading

Page no

Table of figures

Serial no

Page no

The student

demonstrates

well the ability

(100%) to

understand and

complete the

information

required

The student

demonstrates

the ability

(75%) to

understand and

complete the

information

required

The student

demonstrates

the ability (50

%) to

understand and

complete the

information

required

The student

demonstrates

the ability (25

%) to

understand

and complete

the

information

required

The student does

not understand

and complete the

information

required

Score 1 mark 1.00 0.75 0.50 0.25 0

Quality of

information are

accurate and

updated

The student

demonstrates

well the ability

(100%) to

understand and

complete the

information

required

The student

demonstrates

the ability

(75%) to

understand and

complete the

information

required

The student

demonstrates

the ability (50

%) to

understand and

complete the

information

required

The student

demonstrates

the ability (25

%) to

understand

and complete

the

information

required

Does not

understand and

complete the

information

required

Score 3 marks 3.00 2.25 1.50 0.75 0

Originality of

ideas/approach and

level of

innovativeness

The student

demonstrates

(100%)

originality of

ideas/approach

and level of

innovativeness.

The student

demonstrates

(75%)

originality of

ideas/approach

and level of

innovativeness.

The student

demonstrates

(50%)

originality of

ideas/approach

and level of

innovativeness

.

The student

demonstrates

(25%)

originality of

ideas/approac

h and level of

innovativenes

s

Does not

understand and

complete the

information

required

Score 2 marks 2.00 1.50 1.00 0.50 0

Creativity and

innovation, key

contributions of the

topic.

The student

demonstrates

(100%)

creativity,

innovation, and

key contributions

of the topic.

The student

demonstrates

(75%)

creativity,

innovation, and

key

contributions of

the topic.

The student

demonstrates

(50%)

creativity,

innovation,

and key

contributions

of the topic.

The student

demonstrates

(25%)

creativity,

innovation,

and key

contributions

of the topic.

Does not

understand and

complete the

information

required

Score 2 marks 2.00 1.50 1.00 0.50 0

Presentation (10 marks)

Well patterned

Logical sequence

Coherence. (2)

The student

demonstrates

(100%) well

patterned logical

sequence and

coherence in

their presentation

style.

The student

demonstrates

(75%) well

patterned

logical

sequence and

coherence in

their

presentation

style.

The student

demonstrates

(50%) well

patterned

logical

sequence and

coherence in

their

presentation

style.

The student

demonstrates

(25%) well

patterned

logical

sequence and

coherence in

their

presentation

style.

Does not

understand and

complete the

information

required

Tables/Graphs/Chart

s/Diagrams (2)

The student

demonstrates

(100%) in the

presentation with

the inclusion of

tables, graphs,

charts and

diagrams

respectively.

The student

demonstrates

(75%) in the

presentation

with the

inclusion of

tables, graphs,

charts and

diagrams

respectively

The student

demonstrates

(50%) in the

presentation

with the

inclusion of

tables, graphs,

charts and

diagrams

respectively

The student

demonstrates

(25%) in the

presentation

with the

inclusion of

tables,

graphs, charts

and diagrams

respectively

The students

were not able to

include any of

them in their

presentation

slides.

Speaker maintains

good rapport with

audience in the form

of questions to

ensure active

participation. (1)

The student

demonstrates well

the ability (100%)

to understand and

complete the

information

required

The student

demonstrates the

ability (75%) to

understand and

complete the

information

required

The student

demonstrates the

ability (50 %) to

understand and

complete the

information

required

The student

demonstrates

the ability (25

%) to

understand and

complete the

information

required

The student does

not (0%) understand and

complete the

information

required

Speaker uses a clear,

audible voice. (1)

The student

demonstrates well

the ability (100%)

to understand and

complete the

information

required

The student

demonstrates the

ability (75%) to

understand and

complete the

information

required

The student

demonstrates the

ability (50 %) to

understand and

complete the

information

required

The student

demonstrates

the ability (25

%) to

understand and

complete the

information

required

The student does

not (0%) understand and

complete the

information

required

Delivery is poised,

controlled, and

smooth and without

reading. (0.50)

The student

demonstrates well

the ability (100%)

to understand and

complete the

information

required

The student

demonstrates the

ability (75%) to

understand and

complete the

information

required

The student

demonstrates the

ability (50 %) to

understand and

complete the

information

required

The student

demonstrates

the ability (25

%) to

understand and

complete the

information

required

The student does

not (0%) understand and

complete the

information

required

Good language

skills and

pronunciation are

used. (0.50)

The student

demonstrates well

the ability (100%)

to understand and

complete the

information

required

The student

demonstrates the

ability (75%) to

understand and

complete the

information

required

The student

demonstrates the

ability (50 %) to

understand and

complete the

information

required

The student

demonstrates

the ability (25

%) to

understand and

complete the

information

required

The student does

not (0%) understand and

complete the

information

required

Group Coordination

while handling

queries/presentation.

(1)

The student

demonstrates well

the ability (100%)

to understand and

complete the

information

required

The student

demonstrates the

ability (75%) to

understand and

complete the

information

required

The student

demonstrates the

ability (50 %) to

understand and

complete the

information

required

The student

demonstrates

the ability (25

%) to

understand and

complete the

information

required

The student does

not (0%) understand and

complete the

information

required

Length of

presentation is

within the assigned

time limits. (0.50)

The student

demonstrates well

the ability (100%)

to understand and

complete the

information

required

The student

demonstrates the

ability (75%) to

understand and

complete the

information

required

The student

demonstrates the

ability (50 %) to

understand and

complete the

information

required

The student

demonstrates

the ability (25

%) to

understand and

complete the

information

required

The student does

not (0%) understand and

complete the

information

required

Information is well

communicated.

(0.50)

The student

demonstrates well

the ability (100%)

to understand and

complete the

information

required

The student

demonstrates the

ability (75%) to

understand and

complete the

information

required

The student

demonstrates the

ability (50 %) to

understand and

complete the

information

required

The student

demonstrates

the ability (25

%) to

understand and

complete the

information

required

The student does

not (0%) understand and

complete the

information

required

Overall quality and

integrity of

presentation content

and quality of slides

(1)

The student

demonstrates well

the ability (100%)

to understand and

complete the

information

required

The student

demonstrates the

ability (75%) to

understand and

complete the

information

required

The student

demonstrates the

ability (50 %) to

understand and

complete the

information

required

The student

demonstrates

the ability (25

%) to

understand and

complete the

information

required

The student does

not (0%) understand and

complete the

information

required

Score 10 marks 10 7.5 5.00 2.50 0

Course Outline:

No List of Topics Contact Hours

1 Topic 1: Introduction 3

2

Topic 2: Mechanics of Futures Markets (To finance the expanding business environment, banks and other institutions KSA government is adapting their financial products and services to the needs of each sector, from large project funding to short-term working capital for small businesses. Knowledge in Financial Markets and Institutions)

3

3 Topic 3: Hedging Strategies Using Futures 4

4 Topic 4: Interest Rates 3

5 Topic 5: Determination of Forwards and Futures Prices 4

6 Topic 6: Mechanics of Options Markets 4

7 Topic 7: Properties of Stock Options 4

8 Topic 8: Introduction to Binomial Trees 3

9 Topic 9: Swaps 3

Quizzes 2

Mid term 2

Presentation 4

Revision 3

Final Exam 3

Total 45

Course Coordinator: Dr Nisa Vinod Kumar

NVinodkumar@pnu.edu.sa

2.504.50