BARUCH COLLEGE, THE CITY UNIVERSITY OF NEW YORK

Department of Economics and Finance

Finance 4720: Futures Markets
2018 Fall Semester – August 28, 2018 to December 20, 2018
Dr. William R. Henry

SYLLABUS
Course Identifying Information: Finance 4720, Fall Semester 2018,
Section FTRA, Tuesday & Thursday Late Afternoons,
Course Code 57757, 3 Hours, 3 Credits.
Classroom: Section FTRA, Room 155, 9th Floor, Newman Vertical Campus Building,
1 Bernard Baruch Way (25th Street & Lexington Avenue). NVC 9-155
Weekly Meeting Times: Tu & Th, Section FTRA, C. Code 57757, 4:10 P.M.–5:25 P.M.
Office: Vert Campus Bldg., 10th Floor, Cubicle 240-A in the Economics & Finance Dept.
Office Hours: Tuesdays from 1:30 P.M. to 2:30 P.M. All other times by appointment.
Telephone: (646) 312-3521
E-Mail: william.henry@baruch.cuny.edu
Prerequisites: Fin 3610, Fin 3710, and Eco 4000, and a minimum 2.0 GPA (C average)
in Fin 3610, Fin 3710, and Eco 4000.

Course Description and Objectives:

Finance 4720: Futures Markets provides a detailed analysis of futures and related forward markets,
emphasizes the valuation and utilization of financial futures, examines their institutional setting
and establishes an analytical foundation for the pricing and valuation of these market instruments.
The course covers hedging, speculative and arbitrage techniques involving futures contracts and
their cash market counterparts. Relevant empirical evidence on valuation models and on trading
strategies is surveyed, as well.

Textbook:

An Introduction to Derivatives and Risk Management by Don M. Chance and Robert Brooks. 10th
Edition. Copyright (Boston, Massachusetts) 2016, Cengage Learning (South Western). Required.
Library of Congress Control Number: 2014953625 ISBN: 978-1-305-10496-9

Grading:

Based on a Midterm Examination (approximately 40% weight), a cumulative Final Examination

(about 50% weight) and Class Participation (10% weight). Note: some material covered in class
cannot be found in the class textbook. Students are responsible for this material. The Midterm
Examination shall be written on Tuesday, October 30, 2018.
The course textbook of An Introduction to Derivatives and Risk Management, by Don M. Chance
and Robert Brooks, 10th Edition, specified above, will serve as a primary source of knowledge and
learning in this course. Class lectures and class handouts also will be primary sources. Class
handouts shall be posted on the Baruch College Blackboard.

Students with Disabilities

Students with disabilities may be eligible for a reasonable accommodation to enable them to
participate fully in courses at Baruch College. If you feel you may need accommodation, please
contact the Office of Services for Students with Disabilities at 646-312-4590 who will be able to
guide you.

Attendance:

A student should cut no more than four (4) classes during the semester. At every class meeting,
attendance will be taken by having students who are present in class sign an attendance sheet.
These sheets will be used for the purpose of deciding close calls when course grades are awarded.
Beyond the four unexcused absences (or cuts), a course grade of “F” will be assigned to a violating
student.

Students should make every effort to be present in the classroom promptly at the beginning of
class. If student punctuality becomes a problem, the doors to the classroom will be closed fifteen
minutes after the beginning of class. Students will not be permitted to enter the classroom once
the doors are closed. They also will not be permitted to sign an attendance sheet after the doors
are closed.

TOPICS OF LECTURES

1. Structure of Forward & Futures Mkts READING HOMEWORK

a. History & Development Chapters 1, 2
b. Futures vs. Forwards Ch.1 #3, 5, 6, 8, 11, 14, 16, 17, 18
c. Institutional Aspects Ch.2 #6, 7, 12, 13, 15, 16, 17, 20
d. Stock Markets vs Futures Market Class Notes
e. Placing an Order Class Notes Class Homework #1

2. Trading Results
a. Do Speculators Make Money? Class Notes (Various Studies)
b. Future Fund Performance Class Notes (Elton-Gruber-Rentzler Study

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Lecture Topics Continued

3. Pricing Theories Chapter 8 Ch 8 #1, 4, 5, 11, 12, 13

a. Risk Premia: Futures & Expected Spot Price
Normal Backwardation
Normal Contago
Net Hedging Hypothesis
b. Futures & the CAPM Class Notes (Bodie-Rosansky Study)
c. Arbitrage Pricing
Storable Commodities with Positive Cost of Carry Class Homework #2
Storable Commodities with Possibly Negative Cost of Carry Class Homework #3
Convenience Value Concept Class Homework #4

4. Hedging Strategies Chapter 10 Ch 10 #1, 3. 4a 5. 11, 12, 14

a. The Basis Class Homework #5
b. Minimum Variance Hedging
American Airlines & Jet Fuel Hedging Class Notes
Hedging with Stock Index Futures Class Notes

5. Interest Rate & Currency Futures Chapter 9 Ch 9 #4, 6, 15, 16

Ch 10 #4b, 10a, 13
a. T-Bill Interest Rate Spot Market
b. T-Bill Futures Contract Characteristics
c. T-Bill Spot-Futures Arbitrage Class Homework #6
d. Speculative Trading
e. Hedging Examples with T-Bill Futures
f. T-Bond Cash & Futures Markets
g. Duration Calculations Class Notes
h. Hedging with T-Bond Futures Class Homework #7

Academic Integrity

I, Dr. Henry, fully support Baruch College's policy on Academic Honesty, which states, in part:

"Academic dishonesty is unacceptable and will not be tolerated. Cheating, forgery,

plagiarism and collusion in dishonest acts undermine the college's educational mission and
the students' personal and intellectual growth. Baruch students are expected to bear
individual responsibility for their work, to learn the rules and definitions that underlie the
practice of academic integrity, and to uphold its ideals. Ignorance of the rules is not an
acceptable excuse for disobeying them. Any student who attempts to compromise or
devalue the academic process will be sanctioned. "

Academic sanctions in this class will automatically result in an F grade for the course. I am also
required to report suspected academic dishonesty to the Office of the Dean of Students.

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Information on academic dishonesty can be found at
http://www.baruch.cuny.edu/academic/academic_honesty.html

Cheating is a serious offense. Cheating is the attempted or unauthorized use of materials,

information, notes, study aids, devices or communication during an academic exercise. Examples
include but are not limited to:

 Copying from another student during an examination or allowing another to copy your
work
 Unauthorized collaborating on a take home assignment or examination
 Using unauthorized notes during a closed book examination
 Using unauthorized electronic devices during an examination
 Taking an examination for another student
 Asking or allowing another student to take an examination for you
 Changing a corrected exam and returning it for more credit
 Preparing answers or writing notes in a blue book (exam booklet) before an examination.

Thursday, December 13, 2018 – Reading Day for Finance 4720, Section FTRA

Final Examinations Period

Friday, December 14, 2018 through Thursday, December 20, 2018

Thursday, December 20, 2018 – Finance 4720 Scheduled Final Examination:

Thurs., Dec. 20, 2018, Section FTRA, C. Code 57757, 3:30 P.M. – 5:30 P.M.
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