Integrating Financial Software in Derivatives Courses Primary Goals Apply concepts and theory to real markets Provide hands on experience with financial software Integration Techniques: Team projects / homework assignments / Quizzes Structures Futures / Options / Swaps Markets Equities / Fixed Income / Currencies / Commodities Financial Data Providers - Villanova Bloomberg / FACTSET / TD Ameritrade (Think or Swim)
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Integrating Financial Software in Derivatives Courses
Primary Goals Apply concepts and theory to real markets Provide hands on experience with financial software
Integration Techniques: Team projects / homework assignments / Quizzes
Structures Futures / Options / Swaps
Markets Equities / Fixed Income / Currencies / Commodities
Financial Data Providers - Villanova Bloomberg / FACTSET / TD Ameritrade (Think or Swim)
Homework and Quizzes
Treasure hunt approach - with analysis required Find information using financial software Use information to answer questions or do analysis
Example questions What were the spot price and the 6 most nearby futures prices of
WTI Crude Oil on 8/7/13? Based on these prices, is the market in contango or backwardation? Based on the September and October futures prices, and assuming
transportation and storage costs are $.50/bbl and interest rates are at 5%, is there an arbitrage opportunity? Students should consider formula F0 ≤ (S0+U )erT from Hull text
Would your answer change if WTI Crude was widely held as an investment asset instead of a consumption asset? If so, why?
Crude Oil Futures Contract Table
Crude Oil Backwardation - History
Option Model – Crude Oil
Team Project Example
Project based on equity options Students are given $100k paper money Student teams are assigned a stock Teams develop an options strategy They must follow rules and guidelines Strategy is evaluated upon entry and exit Analysis of Option risk elements (Greeks) is done Most profitable Team during the project – bonus See Project Document and Spreadsheet - Details
Linking Bloomberg to Excel
Use the Bloomberg Add-In for exporting to Excel Or you can use the export to excel option in Bloomberg
Have Bloomberg open when pulling data Click Bloomberg Toolbar in Excel Click Navigation button Select a ticker symbol and enter in the field provided Click on “Options” Click on “Options Monitor” Click and hold the “Drag to Excel” icon – drag into
spreadsheet
Sample Options Monitor - MCD
Sample Bloomberg Link to Excel
Example CDS – McDonald’s (MCD)
Example MCD - CDS
MCD CDS Curve
Summary
The Ultimate goal is to enhance learning Exposure to systems actually used in financial
markets Increase motivation and learning through:
Competition for bragging rights and bonus points Student belief that what your teaching is relevant Bringing the theory to practice - making it real Charting and graphing provide better conceptual teaching
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