SYLLABUS

Options and Futures Markets Mark J. Laplante

BA 4348 Section 001 Spring 2005

Lecture: Thursdays 4:00-6:45, SM2.112

My Office: SOM, Room 3.809 My Telephone: 972-883-4784

My Office Hours: Monday 3:30-4:30, and also by appointment My E-mail: mark.laplante@utdallas.edu

Required Textbook:

John C. Hull, Fundamentals of Futures and Options Markets, Fifth Edition

Recommended Textbook:

John C. Hull, Solutions Manual and Study Guide for Fundamentals of Futures and Options Markets, Fifth Edition

The required and recommended tests are available at the campus bookstore and Off Campus Books which is located at 581 W
Campbell Rd, Richardson. Their telephone number is 972-907-8398.

Optional Reading: Though not required, students are strongly encouraged to regularly read a business periodical, I
recommend The Wall Street Journal.

Calculator: You will need a calculator which has financial functions. When I do examples in class I will use a TI-BA II Plus.

Evaluation: Reading Comprehension Questions 15%

Class Participation 15%
Assignment Questions 35%
Final Exam 35%

o There will be a daily reading comprehension question. Missed questions due to absence or tardiness automatically
receive a zero. The value of all reading comprehension questions is 15% of your grade.
o Every student will be an “expert” at least once during the quarter. Experts are assigned a chapter in advance and have
two responsibilities. The first is to find an article which clearly relates to their chapter and bring it to class on their expert
day. You will highlight the portions of the article which relate to the chapter for which you are an expert. The second is
to have studied the chapter in sufficient detail to be able to adequately answer classroom questions in such a way that the
rest of the class understands the answer. You will also do a brief class presentation of an options trading strategy. In
addition, daily preparedness and classroom engagement will be taken into account. The grade you receive for the sum of
these efforts represents 15% of your grade.
o Assigned end of the chapter Assignment Questions are required. Once a chapter is completed answers to Assignment
Questions will be due at the start of the following class. Late submissions will not be accepted. To ensure that your
answers are easily readable it is strongly recommended that you type your answers where possible.
o The final will be cumulative.

Drops: The policies for dropping classes have changed this year. Dates you should know:
Wednesday January 26: Last day to drop the class without a “W”
Monday February 14: Undergraduates “WP” or “WF” withdraw period begins
Monday March 14: Last day to withdraw from the class with a “WP” or “WF”

Other Things You Should Know

• There are no make-ups and all scores will count towards your overall evaluation. If you miss a class you must have
written documentation of a serious illness from a physician. Since there are no make-ups additional weight will be
put on the final. I am very willing to entertain questions you may have regarding grading but will not take these
questions during class. Please submit in writing, within one week, any disputes you have with specific grades in a
well thought-out argument.
• If you would like to request academic accommodations due to a disability please contact Disability Services, Student
Union 1.610, 972-883-2098 (V/TDD). If you have a letter from Disability Services indicating you have a
documented disability that requires academic accommodations, please present the letter to me so we can discuss the
accommodations you might need for class.
 Tentative Course Schedule: See WebCT Calendar for Daily Updates
Date Topic Chapter

Jan 13 Introduction, Mechanics of Futures and Forward Markets 1, 2

Jan 20 Hedging Strategies Using Futures 2,3

Jan 27 Interest Rates 4

Feb 3 Determination of Forward and Futures Prices 5

Feb 10 Interest Rate Futures 6

Feb 17 Mechanics of Options Markets 8

Feb 24 Properties of Stock Options 9

Mar 3 Trading Strategies Involving Options, Class Presentations 10

Mar 10 Spring Break – No Class

Mar 17 Introduction to Binomial Trees 11

Mar 24 Valuing Stock Options: The Black-Scholes Model 12

Mar 31 Options on Stock Indices and Currencies 13

Apr 7 The Greek Letters 15

Apr 14 Binomial Trees in Practice 16

Apr 21 To Be Announced

Apr 28 Final Exam 4:00 p.m.

The following typos and other errors are in the first printing of the book and Solutions Manual/Study Guide. The author has
tried to correct them in subsequent printings and so they may not be present in the copy you have.

Book Errata

Page 6: 7 lines from bottom of text: Replace one July call by one October call

Page 17: last line: change long to short in Problem 1.14. (This is for consistency with the Solutions Manual)

Page 18: Assignment Question 1.27, line 2: change 200 to 20

Page 52: line 3 of text: Replace Table 3.1 by Trading Note 3.1

Page 67: line 1:equation (3.2) should be equation (3.4)

Page 75 line 7: Delete and explain day count conventions. Day count conventions are covered in Chapter 6, not Chapter 4

Page 88, in equation on line 3 replace 4.0 by 0.04, 4.5 by 0.045, and -$125,000 by -$1,250. Also on next few lines 125,000
should be replaced by 1,250 in two places and 123,609 should be replaced by 1,236.09 in two places.

Page 105: Fifth line of example: Replace equation (5.3) by equation (4.3)

Page 120: Change (2.1) to (5.20) on lines 3 and 8

Page 173: lines 12 and 14: 9.5439 should be 9.6439

Page 208: line 3: should read: ..effect is to increase the value of call options and decrease the value of put options..

Page 230: Table 10.2: Last line under Payoff from short put option should be ST – K1

Page 231: Table 10.1: Insert European after month in title. Also call option prices when strike is 55 should be 0.96 not 0.76 in
table.

Page 251: 3 lines from bottom: equation (11.8) should be equation (11.10)

Page 256: 6 lines from bottom: equations (11.9) to (11.12) should be equations (11.11) to (11.14)

Page 262: Problem 11.19: line 4 two months should be four months

Page 268 Business Snapshot12.1: change 1.0124 to 1.124 on line 14.

Page 272: 6 lines from bottom: change $40 to $4.

Solutions Manual/Study Guide Errata

Page 19, Problem 4.14: Discounting should be at the three-year rate of 3.7%. The correct answer is $2,078.85.

Page 21,Problem 5.13: Change six months to three months on the last line.

Page 50, Problem 9.11,line 5: change 65-5=$60 to 64–5=$59. On the next line 59.21 should be 58.21

Page 85, Problem 14.18, second equation should be 30e-0.05×3/12–28=1.63.On the next line –1.63 should be 1.63 and the final
range should be 1.65 < P < 2.37.