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FIN 3380: Introduction to Derivatives

Kean University, Union Campus
#Financial Derivatives #Futures and Forwards #Options #Risk Management #Quantitative Finance

Course Overview

Introduction to Derivatives provides students with a foundation for understanding widely used financial derivatives, including forwards, futures, swaps, and options. The course examines both the mechanics and analytics of derivative contracts as well as their applications in hedging, trading, and financial risk management.

Students learn to interpret derivative-market terminology, analyze futures and options trading mechanisms, calculate contract payoffs, identify arbitrage opportunities, and apply fundamental pricing relationships such as cost-of-carry models and put-call parity.

Topics Covered

  • Introduction to Derivative and Futures Markets
  • Forward and Futures Pricing
  • Cost of Carry and Arbitrage
  • Hedging with Futures
  • Futures Margin and Market Mechanics
  • Properties of Stock Options
  • Option Payoffs and Trading Strategies
  • Put-Call Parity
  • Binomial Option Pricing
  • Black-Scholes-Merton Model
  • Option Greeks and Sensitivity Analysis
  • Swaps

Instructional Approach

The course emphasizes financial intuition before introducing formal pricing models. Payoff diagrams, step-by-step numerical examples, arbitrage arguments, and practical market applications help students understand how derivative contracts respond to changes in prices, interest rates, volatility, and time.

Spreadsheet and computational illustrations are used where appropriate to connect theoretical models with applied pricing, hedging, and sensitivity analysis. The course prioritizes interpretation and practical understanding while maintaining the quantitative foundations needed for derivative analysis.

“Understanding derivatives begins with understanding the risks they are designed to transfer.”