Master of Management Studies (M.M.S) Derivatives and Risk Management Syllabus - Mumbai University 2026

Course objectives

• 1 To introduce the fundamentals and significance of derivatives in financial risk management.
• 2 To enable students to apply pricing models and arbitrage strategies for futures and forwards.
• 3 To develop proficiency in analyzing options, understanding their mechanics, and payoff structures.
• 4 To train students to effectively utilize option pricing models, such as Binomial and Black-Scholes, including the interpretation of Greeks.
• 5 To cultivate skills for designing and executing hedging, spread, and combination strategies using derivatives.

Course outcomes

• CO1: Explain the fundamentals of derivatives, including forwards, futures, and options, along with their role in financial markets and risk management.
• CO2: Apply valuation techniques for futures and forwards, including cost-of-carry models and currency derivatives, to determine fair pricing and arbitrage opportunities.
• CO3: Analyze the mechanics and payoff structures of various options, including synthetic positions and arbitrage strategies like conversions and box spreads.
• CO4: Evaluate option pricing models, including the Binomial and Black-Scholes models, and interpret the impact of key parameters using option Greeks.
• CO5: Design and implement hedging, spread, and combination strategies using derivatives in different market conditions.

Unit 1 CO1, CO2 · 9 hours

Introduction to Derivatives and its application· Basics of Risk Management & properties of /Futures/Forwards (Equity & Commodity) Pricing & Valuation of Futures/Forwards. Equity Arbitrage (Cost of carry Model), Risk Management using Futures · Basis Risk · Introduction to Currencies Forward and Futures and its uses

Unit 2 CO1, CO3 · 3 hours

Mechanics & Properties of Options: Option Terminology, Various types, Boundary Conditions for options and payoff from various options.

Unit 3 CO3, CO4 · 3 hours

Put-call parity: Its applications and interpretation, Synthetic options using put-call parity. Option Arbitrage: Conversions, Reversals, Box Spread.

Unit 4 CO3, CO4 · 6 hours

Option pricing models: Binomial Models (only European) (one period & two period) Black Scholes Model (Equity and Currencies)

Unit 5 CO4, CO5 · 3 hours

Option sensitivities: Sensitivity to the - Underlying - Volatility - Strike price - Interest rate - Time to expiration. Option Sensitivities pricing and uses (Use of Greeks- Delta Gamma, Theta, Vega, Rho)

Unit 6 CO5 · 6 hours

Option Strategies using Various Market Dynamics: (Use of Excel is recommended in this module) Hedging Strategies (Call hedge, put hedge, Covered Put and call) Spread Strategies (Bull Bear Spread, Butterfly, Condor and Calendar) Combination Strategies (Straddle, Strangle, Strip and Strap)

Textbooks

• 1 Options, Future & other Derivatives – by John. C Hull and Shankarshan Basu, Pearson Education India
• 2 Derivatives and Risk Management by Rajiv Shrivastav, OUP India
• 3 Derivatives and Risk Management by R Madhumati Pearson Education India.
• 4 Derivatives and Risk Management by Dhanesh Kumar Khatri (PHI Publication)
• 5 NISM-Series-VIII: Equity Derivatives Certification Examination
• 6 National Stock Exchange of India Ltd: NCFM- Options Trading Strategies Module

Reference Books

• 1 Applied Derivatives – Richard. J. Rendleman. J R
• 2 Option Volatility & Pricing – Sheldon Naten Berg
• 3 The New Options Market – Max Ansbacher