Business 70.

4 – Opt ions, Fut ure s, a nd Com m odit ie s

Depart m ent of Econom ics and Managem ent

Professor Myles Bassell h t t p:/ / use r h om e .br ook lyn .cu n y.e du/ ba sse ll/
¬ Phone: ′718″951- 5317

¬ Em ail: professorbassell2 @yahoo.com * * * check Y OU R em ail daily

¬ Office Hours: * * By Appoint m e nt * *

̇ I n Whit ehead 217A: Tuesdays & Thursdays 5: 00–6: 15 * * By Appoint m ent

̇ Virt ual Office Hours: 24/ 7 Em a il / I nst a nt M e ssa ge

¬ Re quire d T e x t Book

Options, Futures, and Other Derivatives

By John Hull
Prent ice Hall
I SBN : 0131499084
6 t h Edit ion

¬ M y Doze n Obje c t ive s

1. Dist ribut e a writ t en syllabus t he first day of class
2. Dem onst rat e m y abilit y t o organize m at erials for t he class
3. St im ulat e int erest in t he t opic being st udied
4. Generat e effect ive class discussion when appropriat e
5. Com m unicat e effect ively and speak clearly
6. Encourage independent t hinking and e t h ica l be h a vior
7. Dem onst rat e openness t o st udent s’ com m ent s, quest ions, and viewpoint s
8. Display an except ional underst anding of t he course subj ect m at t er
9. Keep t o t he t im e and schedule requirem ent s of t he class
10. Provide st udent s access t o m e out side of class and be available for Q&A
11. Clearly com m unicat e course requirem ent s and assignm ent s
12. Prom pt ly grade exam s

¬ Ex pe c t e d Course Out c om e s
St udent s com plet ing t his course will:
1. Underst and key RI SK M AN AGEM EN T concept s, t erm s, and definit ions
2. Develop an underst anding of how fundam ent al concept s and t heories are applied
3. Com prehend t he im port ance of opt ions, fut ures, and com m odit ies
4. At t ain a pract ical underst anding of different t ypes of de r iva t ive s
5. Appreciat e cu lt u r a l dive r sit y and respect ot hers who are of a different cult ure

¬ M y Goa l

My goal is for st udent s t o L E A R N ! I t is all about you!

O p t i o n s & F u t u r e s : Bus 70.4 Websit e h t t p:/ / u se r h om e .br ook lyn .cu ny.e du / ba sse ll/
Ba ck u p sit e h t t p:/ / m ibu sa .com / br ook lyn /
Br ook lyn Colle ge
Depart m ent of Econom ics and Managem ent
BUS 70.4 – Opt ions, Fut ur es, and Com m odit ies Professor Bassell Page 2 of 9

¬ M y Goa ls For Y ou
1. I ncrease Your general knowledge about t he subj ect
2. Enhance Your abilit y t o analyze and solve problem s
3. I m prove Your abilit y t o u se com pu t e r s a n d t h e I n t e r n e t
4. Expand Your abilit y t o find and use inform at ion on your own
5. Develop Your abilit y t o express your ideas
6. Fort ify Your appreciat ion and sensit ivit y t o e t h ica l issue s
7. Enrich Your underst anding of different cult ures and have you becom e a cham pion of
cu lt u r a l dive r sit y

¬ M y M ission

T o he lp st ude nt s a c hie ve t he ir e duc a t iona l a nd profe ssiona l goa ls.

¬ Course Ove rvie w

The focus of Bus 70.4 is on providing a sophist icat ed overview of t he issues and dilem m as facing
r isk m a na ge r s. Derivat ives ( opt ions and fut ures) are present ed as a t ool for m anagers t o
m inim ize risk. M e t hodology: The t ext book is required and an im port ant t ool used t o expose
st udent s t o im port ant risk m anagem ent concept s and t opics. The a pplica t ion of key risk
m anagem ent concept s will be explored and st udent s will be required t o analyze ca se st u die s.
The classroom experience is designed t o reinforce key concept s from t he t ext book and int roduce
new concept s. Discussion, lect ure, powerpoint present at ions, and video segm ent s about t he
applicat ion of t he concept s will be used t o help st udent s develop a m ast ery in t he subj ect m at t er.
We will review Business Snapshot s for im port ant concept s.
O p t i o n s & F u t u r e s : Bus 70.4 Websit e h t t p:/ / u se r h om e .br ook lyn .cu ny.e du / ba sse ll/
Ba ck u p sit e h t t p:/ / m ibu sa .com / br ook lyn /
Br ook lyn Colle ge
Depar t m ent of Econom ics and Managem ent
BUS 70.4 – Opt ions, Fut ur es, and Com m odit ies
Professor Bassell Page 3 of 9

3 M ini Proje c t s
This course will require students to complete 3 mini projects in an effort to
¬ Strengthen your critical reading, listening, and reasoning skills
¬ Develop your internet research, analytic, and quantitative skills
¬ Enhance your ability to interpret data and solve problems
T he due da t e s a re a s follow s:

¬ 1 st Pa rt M a rc h 1 2 t h

¬ 2 nd Pa rt April 1 6 t h

¬ 3 rd Pa rt May 7th

¬ At t e nda nc e
Cla ss m e e t in gs a r e for you r be n e fit ! Regular at t endance is required.
Excessive absence ( m ore t han 3) or lat eness ( m ore t han 6) will result in a penalt y of one
full grade lower. Absence for religious observance is allowed as out line in t he St udent
Handbook.

St udent s should com e t o class prepared t o part icipat e and t a k e r e a lly good n ot e s! ! !

T he re w ill be inform a t ion sha re d in c la ss t ha t is N OT in t he book . You are

responsible t o know t his m at erial for t he exam s and quizzes. I t is against depart m ent
policy t o give m akeup exam s.
* * * * There are NO m akeup Exam s* * * *

¬ Re a ding Assignm e nt s
Please read t he chapt ers, cases, and ot her m at erials BEFORE class. The chapt ers next
t o t he dat e are t he chapt ers we will discuss in t hat class.

¬ T a lk ing I n Cla ss
Talking in class is allow ed. H OW EVER, only one person is allowed t o speak at a t im e. I expect
t hat you show r e spe ct for st udent s who have opinions different from your own. Also please be
pat ient wit h st udent s who have quest ions and are t rying t o underst and concept s. Talking in class
and being rude will cert ainly have a negat ive im pact your grade.

O p t i o n s & F u t u r e s : Bus 70.4 Websit e h t t p:/ / u se r h om e .br ook lyn .cu ny.e du / ba sse ll/
Ba ck u p sit e h t t p:/ / m ibu sa .com / br ook lyn /
Br ook lyn Colle ge
Depar t m ent of Econom ics and Managem ent
BUS 70.4 – Opt ions, Fut ur es, and Com m odit ies
Professor Bassell Page 4 of 9

¬ Ex a m s (2 )

There will be 2 Exam s * * * * There are NO m akeup Exam s* * * *

Ex a m # D a t e of Ex a m Ch a pt e r s
1 Midt erm M a rc h 1 9 t h 1, 2, 3,4,5,6,7,8,9

2 Final Cum ulat ive

¬ You are required t o t ake bot h exam s. There are N O m a k e up e x a m s allowed by

t he depart m ent . PLEASE do n ot ch e a t or viola t e t h e code of con du ct ! I t is not
wort h get t ing an F or being suspended from t he universit y.
¬ EX T RA CREDI T : There are no EXTRA Credit assignm ent s. Any st udent want ing t o
earn H ON ORS credit will need t o have t heir proj ect approved by m e.

Your exams and projects will be graded diligently. There is N O curve in grading exams. If your
average is a 59 you earned an F. There are N O extra credit assignments. A rigorous process will
be used to determine your final grade. If you get an A you should get satisfaction from knowing that
you worked hard and earned that grade.

¬ Ex a m T ype s
= The Final is * * Cum ula t ive * *

The dat e of t he fir st Ex a m is post ed in t he Reading Schedule

I t will include m ult iple choice, fill- in, m at ching, short essay et c.

¬ Gra ding Pe rc e nt a ge Fact ors im pact ing your grade:

o Ch e a t in g
o Midt erm 50% o I nfrequent at t endance
o Proj ect Part 1 5% o Ru de or disr u pt ive be h a vior
o Proj ect Part 2 5% o Signing t he at t endance sheet and

o Proj ect Part 3 5% leaving

o Sign in g a t t e n da n ce sh e e t for
o Final 25%
som e on e e lse
o At t endance/ Part icipat ion 10% o Failure t o t urn off elect ronic
devices ( cell phones, pagers et c)

O p t i o n s & F u t u r e s : Bus 70.4 Websit e h t t p:/ / u se r h om e .br ook lyn .cu ny.e du / ba sse ll/
Ba ck u p sit e h t t p:/ / m ibu sa .com / br ook lyn /
Br ook lyn Colle ge
Depar t m ent of Econom ics and Managem ent
BUS 70.4 – Opt ions, Fut ur es, and Com m odit ies
Professor Bassell Page 5 of 9

¬ Gra ding Crit e ria

A 92.5% + C 72.5% t o 77.49%

A- 90.0% t o 92.49% C- 70.0% t o 72.49%
B+ 87.5% t o 89.99% D+ 67.5% t o 69.99%
B 82.5% t o 87.49% D 62.5% t o 67.49%
B- 80.0% t o 82.49% D- 60.0% t o 62.49%
C+ 77.5% t o 79.99% F Below 60%

¬ St udy Guide s, Proje c t s, a nd Assignm e nt s

You must complete and submit ALL study guides, projects, and assignments. You must submit them the day
they are due. Late submissions of projects will bear a 1 full grade lower penalty. Study guides count towards
class participation. Each study guide or assignment not submitted reduces your course grade 1 point. Study
guides includes, but not limited to end of chapter QP (Questions and Problems) and AQ (Assignment

Questions). Before submitting your study guide assignment m a k e a c opy of your completed study guide

assignment so you can use it to study. Make sure it is neat and easy to read. Also make sure that it is in your

ow n ha ndw rit ing. * * * * * Do not photo copy and submit the study guide of someone else.

Some databases that are available at Brooklyn College that would be relevant to the class
(all of the databases mentioned below are available remotely)
+Business Source Premier -- access to full-text, scholarly materials (as well as trade publications, case studies)

+Communication & Mass Media Complete - access to full-text, scholarly materials, trade publications, etc).

+Business & Company Resource Center - search for company or industry information & profiles (rankings, products & brands, chronologies,
etc.), contains some articles, but does not have a robust searching interface. (articles could discuss management issues/best practices for a
company/industry)
+Academic Search Premier - access to full-text, scholarly materials, popular magazines, trade publications, newspapers, etc. This covers
many subject areas.
+JSTOR - everything in this database is available in full-text, all journals are scholarly; -Project Muse - everything in this database is
available in full-text, all journals are scholarly; covers many subject areas
T o ge t t o t he se da t a ba se s from the Brooklyn College Library main page:

+Under Research Tools, choose Databases for an alphabetical listing (if you know the name of the database you want to search) OR

+Under Research Tools, choose Resources by subject (to get a list of database in that subject area)
Don't forget the New York Public Library Business Library. (SIBL) has amazing resources
ht t p://w w w .nypl.org/re se a rc h/sibl/inde x .ht m l

how to get a library card ----> http://www.nypl.org/books/cards.html

Br ook lyn Colle ge
Depar t m ent of Econom ics and Managem ent
BUS 70.4 – Opt ions, Fut ur es, and Com m odit ies
Professor Bassell Page 6 of 9

Code of Conduc t
This Code of Conduct highlights and supplements, but does not replace the Code of Conduct issued by
Brooklyn College and/or The City University of New York (C.U.N.Y.). The goal of this code is to maximize the
classroom experience for all. Your course grade is in part a function of your:
1. exam, project, and quiz results
2. level of participation
a. projecting a positive attitude
b. making intelligent and relevant remarks
3. accurate completion and timely submission of study guides

There are other factors that can have a significant impact on your course grade and they include:
• Cheating
o (calculators, phones, ipods, pda’s, blackberry’s, treo, and other devices are NOT
allowed during any exam)
• Disrupt ive Be ha vior
o Rudeness
o Disrespect
o Lateness
o Interrupting the lecture
• Fre que nt a bse nc e

• Signing the attendance sheet and leaving OR signing for someone else
• Fa ilure t o t urn off e le c t ronic de vic e s (cell, phones, pagers etc)

Pe na lt ie s
Violation of this Code of Conduct and other rules of Brooklyn College and C.U.N.Y. can result in:
• Lowering your course grade one full letter per offense
• Receiving an F or failing grade for the course
• Being suspended or expelled from the college or university

O p t i o n s & F u t u r e s : Bus 70.4 Websit e h t t p:/ / u se r h om e .br ook lyn .cu ny.e du / ba sse ll/
Ba ck u p sit e h t t p:/ / m ibu sa .com / br ook lyn /
Br ook lyn Colle ge
Depar t m ent of Econom ics and Managem ent
BUS 70.4 – Opt ions, Fut ur es, and Com m odit ies
Professor Bassell Page 7 of 9

Options, Futures, and Other Derivatives

By John Hull
Prent ice Hall 6t h Edit ion
I SBN : 0131499084

Table of Contents
Preface.
1. Introduction.
2. Mechanics of Futures Markets.
3. Hedging Strategies Using Futures.
4. Interest Rates.
5. Determination of Forward and Futures Prices.
6. Interest Rate Futures.
7. Swaps.
8. Mechanics of Options Markets.
9. Properties of Stock Options.
10. Trading Strategies Involving Options.
11. Binomial Trees.
12. Wiener Processes and Ito’s Lemma.
13. The Black-Scholes-Merton Model.
14. Options on Stock Indices, Currencies, and Futures.
15. Greek Letters.
16. Volatility Smiles.
17. Basic Numerical Procedures.
18. Value at Risk.
19. Estimating Volatilities and Correlations for Risk Management.
20. Credit Risk.
21. Credit Derivatives.
22. Exotic Options.
23. Insurance, Weather, and Energy Derivatives.
24. More on Models and Numerical Procedures.
25. Martingales and Measures.
26. Interest Rate Derivatives: The Standard Market Models.
27. Convexity, Timing, and Quanto Adjustments.
28. Interest Rate Derivatives: Models of the Short Rate.
29. Interest Rate Derivatives: HJM and LMM.
30. Swaps Revisited.
31. Real Options.
32. Derivatives Mishaps and What We Can Learn from Them.
Br ook lyn Colle ge – Spr ing 2007

Depar t m ent of Econom ics and Managem ent Re a din g Sch e du le

BUS 70.4 – Opt ions, Fut ur es, and Com m odit ies
Professor Myles Bassell pr ofe ssor ba sse ll2 @ya h oo.com Page 8 of 9

W eek Date Topics Re a din g Due

Assign m e n t s Dates
1 Jan 29 Risk Dynam ics ( Chapt er 1)

2 Feb 5 Mechanics of Futures (2) Chapt ers 2 & 3 AQ 1.26, 1.27,

1.28, 1.29
Hedging St rat egies ( 3)
3 Feb 12 Lincolns Birt hday - Colle ge Close d Colle ge
Fe b 1 5 - N o Cla ss Close d
4 Feb 19 President s Day – Colle ge Close d Colle ge
Fe b 2 1 - N o Cla ss Close d
5 Feb 26 Interest Rates (4) Chapt ers 4 & 5 QP 2.1 – 2.15
QP 3.1 – 3.18
Forward & Future Prices (5)
AQ 3.23 – 3.26

6 March 5 Interest Rate Futures (6) Chapt ers 6 & 7 QP 4.1- 4.23

Swaps (7) AQ 4.24- 4.28

QP 5.1- 5.12
AQ 5.24- 5.27

7 March 12 Options Markets (8) Chapt ers 8 & 9 Subm it

Properties of Stock Options (9) Proje c t 1
8 March 19 Chapt ers M idt e rm
* * * M idt e rm EX AM * * * 1,2,3,4,5,6,7,8,9
Ex a m
9 March 26 Trading Strategies (10) Chapt er 10 Go t o w e b
Options on Stock Indices (14) Chapt er 14
10 Apr 2 Spr in g Br e a k No Class -
11 Apr 9 Spr in g Br e a k No Class -
12 Apr 16 Credit Risk (20) Subm it
Credit Derivatives (21) Proje c t 2
13 Apr 23 Independent Study No Class -
14 Apr 30 Independent Study No Class -
15 May 7 Real Options (31) Subm it
Proje c t 3
16 May 14 La st D a y of Cla ss Go t o w e b
Review
May 21- 25 Cum ulat ive 6- 8PM FI N AL Ex a m
Br ook lyn Colle ge – Spr ing 2007
Depar t m ent of Econom ics and Managem ent
BUS 70.4 – Opt ions, Fut ur es, and Com m odit ies
Professor Bassell [email protected] Page 8 of 9

below is a list of the important dates for the 2007 Spring semester

Monday, January 29 - First day of class

Monday, February 5 - Last day to add a course;

Monday, February 12 - College Closed - Lincoln's Birthday

Tuesday, February 13 - Last day to file Pass/Fail application;

Thursday, February 15 - Monday Schedule

Monday, February 19th - College Closed - Presidents Day

Tuesday, February 20 - Last day to drop a course without a grade;

Wednesday, February 21 - Monday Schedule

Thursday, March 15 - Last day to file for Spring 2007 Graduation;

April 2 - 10 Spring Break

Thursday, April 12 - Last day to resolve Fall 2006 Incomplete grades

Thursday, April 12 - Last day to resolve Fall 2006 ABS grades

Thursday, April 19 - Last day to apply for withdrawal from a course with a W (non-penalty) grade;