Kenyon College

Department of Economics

Economics 345, Futures and Options

Fall 2016

Mr. Melick Office Hours

Office: Ascension 306 2:10 pm – 3:30 pm M,W,F

Email: [email protected] 11:10 am – 1:00 pm T,R

and by appointment

begin with the study of market terminology and structure. We then turn to the pricing of

forwards and futures followed by swaps. The majority of the course is spent on option pricing.

The binomial model will be used to motivate a careful derivation and discussion of the Black-

Scholes pricing equation. Throughout the course, careful attention will be paid to the relationship

between derivative prices, and market participants’ risk preferences and expectations for future

realizations of the price of the underlying asset. Students will likely make extensive use of Excel.

Pre-requisites ECON 101 and ECON 102.

Required Texts and Supplements

McDonald, Robert L., Derivatives Markets, (Boston, MA: Pearson, Third Edition).

in class. The dates of the exam are shown on the attached Course Outline.

C. Problem Sets: Throughout the semester a number of problem sets will be assigned.

D. Group Presentation on Derivatives Debacle. Groups of 2 or 3 students will present a

case study to the class on a well-known derivatives debacle, for example Amaranth or

Metallgesellschaft. More details on this assignment will be provided approximately three

weeks into the semester

Grading

Your final course grade will be based on the following weighting scheme

Final Exam 35%

Extra Credit

Students in this course might have some interest in a career in financial services. If so,

knowledge of the Bloomberg Professional Service (often called the Bloomberg Terminal) can be

a useful skill. Toward that end, any student who completes the Bloomberg Market Concepts

(BMC) 8-hour e-learning course will receive extra credit in the amount of 2 percent added to

their final exam score. The BMC course must be completed by October 17, 2016 in order to

receive this extra credit. Details on how to register and complete the BMC are available on the

course Moodle page.

Class Attendance

Problem Sets

The major role of the problem sets is to provide an opportunity to practice applications of

the theory. You may work cooperatively with other class members on the assignments but it is

your responsibility to understand the material and submit an individual copy of solutions. The

time spent struggling on the problem sets helps to solidify your understanding of the material.

NOTE: Problem sets will not be accepted after the beginning of class on the due date

under any circumstances, but they may be turned in early. Only neat and well-organized

solutions will be graded. Sloppy or careless submissions will receive no credit

Academic Honesty

Disabilities

If you have a physical, psychological, medical or learning disability that may impact your

ability to carry out assigned course work, you must contact the Office of Disability Services as

soon as possible. The Director of Student Accessibility and Support Services, Erin Salva

([email protected]), will review your concerns and determine, with you, what

accommodations are appropriate. No accommodations will be made without notification from

the Director. All information and documentation concerning a disability is confidential.