Both the Department of Agricultural and Consumer Economics and the Department of Finance offer courses to undergraduate and graduate students in futures and options markets. Except for basic concepts, there seems remarkably little overlap between courses in the two Departments. Students have the opportunity of being exposed to a wide variety of material.
Although a general commodity marketing course, students learn the basics of futures markets, then participate in a trading simulation for about 6 weeks that relies on actual prices quoted from the markets everyday. Students are allowed to trade six commodities (contracts), and they enter their trades with the "Lose Your Shirt" brokerage house. Students are graded on the reasons for their trades and on a paper evaluating their own experiences and trading results.
This is a comprehensive course describing the development of futures trading, operation and governance of commodity exchanges, economic functions of futures trading, operational procedures and regulation of the markets. The main focus is on understanding basis relationships and patterns, and procedures and strategies firms need to follow in managing their price risks. A broad spectrum of agricultural, metal, financial instrument and currency contracts are covered.
A computer simulation program, called HedgeSim, has been integrated into Ag Econ 340. HedgeSim, a complex computer program, utilizes both futures and option markets. It is designed to give students experience in applying risk management strategies in realistic, dynamic situations, simulating being the manager of either a grain farm or livestock production unit. The student is given actual daily historical cash, futures and options price data, one day at a time for a full marketing year, and must make realistic marketing and pricing decisions in any of the three markets. Decisions are made as any producer would as time progresses through the marketing year.
Finance 362 is an introduction to options and futures markets for financial assets. This advanced investments course combines financial theory and its practical application. Simple as well as complex arbitrage, hedging and spread strategies are discussed throughout the course. The course also covers theories of pricing of financial assets and the application of these contracts for asset and risk management in a portfolio context. Approximately one-half the course is devoted to futures markets and price relationships in financial markets, while the other half focuses on options markets. The latter includes applications, strategies and assessment of alternative option pricing models.
Both Departments offer one course at the graduate level. Both courses are advanced, emphasizing current research in futures and options markets.
This class concentrates on reviewing academic literature based mainly on commodity markets. Offered in a workshop/seminar format, topics covered include, among others, the price of storage and basis theory, market efficiency and performance, market information, price behavior, risk premium, forward pricing ability. This is a comprehensive course where students are active participants and write research papers.
This class acquaints the students with the literature on options and futures markets, emphasizing financial asset markets. This is an advanced investments course combining financial theory and it practical application. Topics include futures pricing models, price behavior, hedging models and estimation, stock index futures and program trading, interest rate futures, swaps and bond portfolio management, and foreign currency futures. Considerable emphasis is given to options pricing models and arbitrage relationships. Students are also expected to write a research paper.
The goal of the course is to provide participants with a solid understanding of the tools and techniques of risk management and financial engineering. The course will address why financial managers should (or shouldn't) manage financial risk, modern techniques for measuring financial risk, and the use of derivative instruments such as forwards, futures, options, swaps and related instruments to manage risk and create solutions to financial problems.