SYLLABUS

University: Technical University of Košice

Faculty: Faculty of Economics

Department: Department of Finance

Course Number: 35000375

Course Name: Financial Engineering

Type, scope and method of learning activities:
Course Type: Numerical exercises, Lecture
Recommended scope of the course content (in hours):
Full-time study (hours per week): 2
Part-time study (hours per semester): WT 26/,6,20
Study Method:

Number of credits: 3

Recommended semester of study: WT

Recommended semester

Study programme

Study grade

Study Method

2.rok WT

Finance, Banking and Investment (FBI_Ing_D_en)

Master

Attendance

Level of study: Master

Prerequisites:

Course completion requirements:
Assessment and completion of the course: Graded credit test
Continuous assessment:
Final assessment: Student passes the final assessment and passes the examination when he or she meets the requirement to obtain at least 51% out of 100%.
Teaching is full-time and part-time – through the activities in Moodle in the range of 2 hours of exercises per week. To successfully graduation, it is necessary to elaborate 2 semester projects for 50 points and the solve tasks for 50 points presented during the semester. The tasks are solved in a team and are presented to other students during the exercises. The tasks are evaluated continuously and mutually between the various teams. Individual projects are submitted in Moodle and are evaluated by the teacher. The evaluation process is based on a combination of verbal and non-verbal evaluation by points.
Overall assessment: Overall assessment is the sum of the assessments obtained by students in the assessment period. The overall result is determined in accordance with the internal regulations of the Technical University in Košice. (Study Regulations, the internal regulation principles of doctoral studies)

Learning outcomes:
The aim of the course is to teach students to understand the complex issue of financial engineering in the context of investment instruments design using options. The course focuses on possibilities of practical use of classic and exotic options in trading and hedging strategies. It provides approaches for proposal and comparison of different portfolios created by options. Students acquire knowledge about the creation of innovative investment products – structured products. They are able to apply theoretical knowledge in the field of practical investment. They are able to solve logical tasks from the issue of financial engineering within the team and evaluate the findings in the field of investment strategies.
After completing the course students should have:
Knowledge about classical and exotic options and their use in solving of financing and investment problems; about structured products and the nature of their creation; about the principles of financial engineering – a modern scientific discipline that focuses on the application of theoretical knowledge in practice.
Skills to create singular and combined trading and hedging strategies for various future scenarios of underlying asset price development, analyze their profit functions and present them graphically, formulate recommendations for potential traders and hedgers; to perform economic and comparative analysis of structured products and to create existing and new structured products.
Competences that include the ability to solve practical tasks based on the study of theoretical knowledge using real data from the financial market; to evaluate the results of performed analysis and present their findings verbally and graphically.
As part of an active educational process, we apply several teaching methods. We use the exposure method with the application of analytical and comparative methods for the interpretation of new knowledge. We use the practical method in the application of theoretical knowledge to specific examples with the aim to practice the procedure. Exercises are realized using project teaching, which is focused on group teamwork of students in solving of practical tasks. The presentation of the team tasks contributes to the development of communication skills and the mutual evaluation of students to achievement of social competencies.

Brief course content:
1. C: Introduction to the financial engineering – nature and importance. Options and financial engineering. Classic options – basic characteristics, profit functions. Theoretical analysis, practical application and practical task solving activities.
2. C: Utilization of classic options in the trading strategy creation. Theoretical analysis, practical application and practical task solving activities.
3. C: Utilization of classic options in the hedging strategy creation. Theoretical analysis, practical application and practical task solving activities.
4. C: Exotic options – basic characteristics, classification, profit functions. Classic versus exotic options. Theoretical analysis, practical application and practical task solving activities.
5. C: Utilization of exotic options in the trading strategy creation. Theoretical analysis, practical application and practical task solving activities.
6. C: Utilization of exotic options in the hedging strategy creation. Theoretical analysis, practical application practical task solving activities.
7. C: Portfolio creation using options. Practical task solving activities.
8. C: Submission and evaluation of the 1st project.
9. C: Investment certificates. Basic characteristic. Linear, guaranteed and airbag certificates. Theoretical analysis, practical application and practical task solving activities.
10. C: Sprint, discount and bonus certificates. Theoretical analysis, practical application and practical task solving activities.
11. C: The nature of the creation of investment certificates. Theoretical analysis, practical application and practical task solving activities.
12. C: Portfolio creation using investment certificates. Practical task solving activities.
13. C: Submission and evaluation of the 2nd project.

Recommended Reference Sources:
Bobriková, M., Gordiaková, Z. a Timková, M. (2014). Design Principles of Capped Bonus and Capped Twin-Win Certificates. Economic Review, 65 (4), p. 352-382. ISSN 0424-7558.
Bobriková, M. a Timková, M. (2015). Reverse bonus certificate design and valuation using pricing by duplication methods. Scientific Annals of the "Alexandru Ioan Cuza" University of Iasi. Economic Sciences, 62 (3), p. 277-289. ISSN 0379-7864.
Bobriková, M. a Timková, M. (2017). Financial engineering with options and its implementation for issuing of new financial innovations. Montenegrin Journal of Economics, 13 (3), p. 7-18. ISSN 1800-5845.
Bluemke, A. (2009). How to invest in structured products: a guide for investors and investment advisors. Chichester, West Sussex, UK: Wiley. ISBN 978-0-470-74679-0.
Cohen, G. (2005). The bible of options strategies: the definitive guide for practical trading strategies. Financial Times Prentice Hall. ISBN 978-0-131-71066-5.
Haug, E. (1998). The Complete Guide to Option Pricing Formulas. McGraw-Hill. ISBN 0-7863-1240-8.
Hull, J. C. (2008). Options, Futures, and Other Derivatives. 7th edition. New Jersey: Pearson Prentice Hall. ISBN 10 0136015867.
Kolb, R. W. (2007). Futures, Options, a Swaps. 5rd ed. Wiley-Blackwell Publishers. ISBN 10 1405150491.
Nelken, I. (1996). The Handbook of Exotic Options: Instruments, Analysis and Applications. New York: Mc Graw-Hill. ISBN 1-55738-904-7.
Šoltés, V. a Bobriková, M. (2013). Hedging Against a Price Drop Using the Inverse Vertical Ratio Put Spread Strategy Formed by Barrier Options. Engineering Economics, 24 (1), p. 18-27. ISSN 1392-2785.
Taleb, N.N. (1997). Dynamic Hedging: Managing Vanilla and Exotic Options. Hardcover: Wiley a Sons. ISBN 978-0-471-15280-4.
Zhang, P. G. (1998). Exotic options. 2nd edition. Singapore: World Scientific Publishing Co.Pte.Ltd. ISBN 10 9810235216.

Recommended optional program components:

Languages required for the course completion:

Notes:

Course assessment:
Total number of students assessed: 0

Teacher:
Ing. Martina Bobriková, PhD.

Last modified: 31.08.2023

Approved by: person(s) responsible for the study program