Aggiornato A.A. 2025-2026
Introduction to Options, Futures and Derivatives
COURSE INSTRUCTOR
João Amaro de Matos
SHORT BIOGRAPHY
João Amaro de Matos has been Vice Rector of NOVA University from 2017 to 2025, and was formerly the Associate Dean for Institutional Relations and International Development at NOVA School of Business and Economics for 13 years. He holds a PhD in Physics from São Paulo University (Brazil) and a PhD in Management from INSEAD. His research is centred in asset pricing and incomplete markets, in particular in option pricing. He is more recently focused on modelling the impact of social interaction in different kinds of market mechanisms. His research has been published in international journals of Physics and Finance. He published "Theoretical Foundations of Corporate Finance" in 2002, a book by Princeton University Press, and teaches different subjects from Basic Corporate Finance to Continuous-Time Finance, including topics such as VaR, Derivatives and Risk Management. He visits regularly international institutions in Europe and South-America teaching executives, PhDs or graduate courses.
INSTITUTIONAL EMAIL
amatos@novasbe.pt
OFFICE HOURS
TBA
PREREQUISITE(S) / PRÉ-REQUISITO(S)
NA
COURSE UNIT AIMS
This course is designed for students who are not necessarily from the area of Finance and do not have previous knowledge of the topic, but are interested in the area of financial markets and financial instruments. Its content is intended to be an introduction to derivatives, focusing on their economic content, strategic use and its mathematical background. We introduce the basics derivatives instruments namely futures, forwards, and options. The course explores the uses of such instruments, their pricing principles and trading mechanisms.
COURSE UNIT CONTENT
Class 1: Introduction to Futures and Forwards: Mechanics of Future Markets
- The historical origin of Derivatives
- Introduction to Futures and Forward contracts
- Mechanism of Futures markets
- Futures Price and the principle of no-arbitrage
Class 2: From Future to Options
- The payoff: interpreting the differences between Futures and Options
- Strategies with options
- The no-arbitrage pricing limits
- Put-Call Parity Relation
Class 3: Pricing Options: the Binomial model
- The two-state economy with two assets
- The one period pricing
- The risk-neutral probability measure
- The two-period pricing
Class 4: Hedging under the Binomial Model
- Hedging strategies
- Delta hedging and the replicating portfolio
- Risk and Expected return of options
- The Greeks
Class 5: Pricing Options: the continuous-time limit of the Binomial model
- The multiperiod pricing model
- Relation between volatility and the Binomial model
- The continuous-time limit of the one-period model
- The Black-Scholes Partial differential equation
Class 6: Pricing Options: the Black and Scholes Model
- The Black-Scholes formula as the solution
- Intuition for the Black Scholes pricing formula
- Properties of the Black-Scholes solution
- Greeks and hedging under Black-Scholes
LEARNING OBJECTIVES
- Knowledge and Understanding
Understand and explain the use of futures, Options and other Derivatives
- Subject-Specific Skills
Understand and implement the principles of Pricing and Hedging
- General Skills
- Improves analytical thinking
- Improves the ability to translate knowledge into business and academic practice
- Improves intuition about financial markets
- Provides learning experience in making decisions under uncertainty
- Introduces financial instruments and financial markets' mechanisms
TEACHING AND LEARNING METHODS
The grading is based on the teaching methods: lectures, exercises, and final evaluation
Class participation: 20%
Individual Problem Sets: 20 %
Final exam: 60%
BIBLIOGRAPHY
Prof.ssa Lucia Leonelli
