AGEC 448 AGEC 601 AGRICULTURAL COMMODITY FUTURES COMMODITY FUTURES & OPTIONS MARKETS SYLLABUS SPRING 2014 SCHEDULE

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1 AGEC 448 AGRICULTURAL COMMODITY FUTURES AGEC 601 COMMODITY FUTURES & OPTIONS MARKETS SYLLABUS SPRING 2014 SCHEDULE Time: TR, 2:20pm 3:35pm (stacked sections) Location: Heep Center, Rm.103 INSTRUCTOR Dr. Dmitry Vedenov Office: 344 AGLS Building Phone: (979) INSTRUCTOR AVAILABILITY/OFFICE HOURS Office hours: Monday, 1:30pm 3:30pm or by appointment Appointments can be scheduled by or by phone. An effort will be made to accommodate walkins within reasonable limits. s are the most reliable way to contact the instructor. Class-related e- mails will be answered within 24 hours. TEACHING ASSISTANT Ms. Erin Hardin Office & Phone: TBA PREREQUISITES AGEC 448: AGEC 105 or 3 hours of economics & AGEC 314 & AGEC 317 or concurrent enrollment & U3 or U4 classification AGEC 601: MATH 142 & STAT 303 or equivalents AGEC 448/601, Syllabus -1-

2 CATALOG ENTRIES AGEC 448: Agricultural Commodity Futures (3-0). Activities of commodity futures exchanges; the mechanics of trading futures contracts; the use of futures trading for hedging and forward pricing; and options, basis behavior, and hedging strategies for selected commodities. AGEC 601: Commodity Futures and Options Markets (3-0). Price risk management using agricultural commodity futures and options markets, theories of hedging and formulation of optimal hedging strategies, applied hedging strategies evaluated with emphasis on options relative to futures. COURSE OBJECTIVES AND LEARNING OUTCOMES The objective of this course is to provide students with a solid understanding of the purpose, mechanics, risks, and uses of futures, options, and other relevant derivative securities, as well as their role in the economy. Emphasis will be on agricultural commodities, but non-agricultural commodities and financials will also receive attention. By the end of the semester, the students are expected to know how the futures and option markets work; how to use futures for hedging; how to find theoretical prices of futures and option contracts. what are the typical trading strategies using futures and options, what are they used for, and what are the associated risks; TEXTBOOK & RESOURCES REQUIRED READING* Jarrow, R.A. and Chatterjea, A. An Introduction to Derivative Securities, Financial Markets, and Risk Management, 1 st Edition, W.W. Norton & Company, ISBN (print). * The Department Head has approved the use of these materials. OTHER RESOURCES Lecture notes and other class materials will be posted as necessary on the class website available through ecampus ( ecampus is a new Learning Management System that replaced elearning. Students are responsible for familiarizing themselves with ecampus. Online help is available at AGEC 448/601, Syllabus -2-

3 An advanced calculator may be needed for in-class exercises and exams. A TI BAII Plus financial calculator is recommended. However, engineering calculators that have built-in financial functions (e.g. TI83/84/89/92) can be used as an alternative. Smartphone-based calculator apps can be used during regular classes. However, the use of smartphones will be prohibited during the exams. Students are responsible for familiarizing themselves with the calculator of their choice well in advance of the exams. i>clicker2 response system will be used in the class on a regular basis. Students are required to purchase an i>clicker2 remote for in-class participation. MS Excel will be required to complete some assignments. Furthermore, simulated trading assignments will require online access. It is students responsibility to ensure access to a computer with adequate software installed. Open Access Labs are available throughout campus. CLASS PROCEDURES AND REQUIREMENTS CLASS FORMAT Class format will be a combination of lectures and class discussions. Students are expected to complete assigned reading in preparation for the class. Most of the concepts will be developed in the class through discussions and short exercises. Lecture notes will provide only an outline of the material. They should not be considered a substitute to reading the textbook or attending the class. Lectures for AGEC 448 and AGEC 601 will be held concurrently. While students will be exposed to similar material during the lectures, AGEC 601 students will be generally held to a higher standard regarding their depth of knowledge, particularly with respect to quantitative aspects of the course. AGEC 601 students will be required to complete extra/more difficult exam problems, additional problem sets, and/or journal readings assignments. They will be also assigned a research project. CLASS MATERIALS The instructor will rely primarily on the electronic methods of distribution of class materials. Lecture notes, homework assignments, reading from periodicals or journal articles, etc. will be posted on ecampus with an appropriate lead time. The postings will be announced in class and by . Students are responsible for monitoring their accounts of record and are encouraged to visit class page on ecampus on a regular basis. AGEC 448/601, Syllabus -3-

4 I>CLICKERS i>clicker2 is a response system that allows students to respond to questions posed during class sessions. In-class participation will be a part of the course grade. i>clickers version 2 (with display) are required. Older version of i>clickers will not work, since they do not allow input of numerical answers. In order to receive participation credit, students are required to register their i>clickers online by visiting Detailed instructions on registration will be posted on ecampus. UIN should be entered in the Student ID field on the registration page. All i>clickers should be registered no later than Tuesday, January 21. Technical support for i>clickers is available online at i>clickers will be used in nearly every class. Students are responsible for bringing the remotes to the class on a regular basis and maintaining those in a good working order. Lost of broken i>clickers will need to be promptly replaced and new remote ID ed to the instructor for registration purposes. Abuse of i>clickers (using somebody else s remotes, using multiple remotes, etc.) will be considered a violation of Aggie Honor Code and will lead to grade penalties. ATTENDANCE Attendance of class sessions is essential to successfully completing the course. Excused absences will be handled in accordance with the TAMU policies and Student Rules ( A satisfactory advance notice and written documentation of an excuse will have to be provided. *Please note that as per Student Rule 7.6, if the student is absent for excused reasons for an unreasonable amount of time during the semester, he/she mays still end up getting a grade of W during the semester enrolled or a NG (no grade) following posting of final grades. Students who anticipate missing a substantial number of classes might consider taking this course during another semester when their schedule is more flexible. More than three unexcused absences will result in a grade penalty. ASSIGNMENTS AND TESTS Reading from the textbook will be assigned for each class. Students are expected to review the assigned material prior to the class in order to be able to follow the presentation and participate in discussions. Quizzes and/or i>clicker response questions will be given during the semester to provide students with a feedback on their understanding of the textbook material. AGEC 448/601, Syllabus -4-

5 Several homework assignments will be given during the semester. The due dates of the assignments will be determined by the overall class progress. The assignments will be posted on the course website at least a week in advance. Homework assignments must be submitted electronically through ecampus to ensure accurate recordkeeping. Students are responsible for familiarizing themselves with the submission process through ecampus. Assignments typed up in a word processor are preferred. Scanned copies of handwritten pages can be submitted as long as those are converted to the pdf format. Submission of photos of handwritten pages taken with smartphones or low-quality cameras are strongly discouraged. Any grading issues due to illegibility of such submissions will be resolved not in favor of the student. Paper copies of the assignments will not be accepted. Two exams will be given during the semester. The exams will be non-cumulative and will test on the material covered since the previous exam. The exams are tentatively scheduled for March 6 and April 24. A comprehensive final exam will be given on Wednesday, May 7, from 1:00pm to 3:00pm. The date and time of the final exam is scheduled by the University and is outside of instructor s control. Please plan your schedule accordingly. All students will participate in a simulated trading game. In general, this will involve interaction with an online trading platform for conducting simulated futures trades. Students will be required to complete a minimum number of trades throughout the semester at set intervals, and provide written reports regarding their strategy, reasoning, and logic behind the executed trades. The grade for this part of the course will be based primarily on the contents of these reports rather than portfolio performance. More details on the trading game project will be provided during the second week of classes. Students enrolled in AGEC 601 will be required to complete a research project related to the course. The students will select the research topic and submit an outline, first draft, and final report on the project. More details will be announced during the second week of classes. MAKE-UP TESTS AND LATE ASSIGNMENT POLICY Unless announced otherwise, all electronic assignments will have to be submitted by 11:59pm on the dates they are due. Late assignments will not be accepted. Since all submissions are electronic, absence from the class does not excuse the students from submitting the assignment on time. In the event a student cannot complete an assignment due to reasons deemed excusable by the TAMU policies, make-up arrangements will be made on a case-by-case basis. For 601 students only: failure to turn in the research project report will result in a grade of Incomplete for the course. Arrangements for completing the course requirements will have to be made on an individual basis. AGEC 448/601, Syllabus -5-

6 GRADING All intermediate grades will be posted on ecampus. The lowest of the two exam grades (two midterms and the final) will be dropped and not count toward the final grade. All other grades will be weighted as follows AGEC 448 AGEC 601 In-Class Participation 10% 10% Homework 25% 15% Exam 1 25% 20% Exam 2 25% 20% Trading Experience 10% 10% Research Project 20% Total 95.00% 95.00% The remaining 5% of the grade average will be determined by the attendance. Full 5% attendance grade will be given to students with three or fewer unexcused absences. Each unexcused absence beyond that will incur a 1% penalty. For example, a student who missed five classes without a valid excuse would have her/his attendance grade reduced down to 3%. Students who miss eight or more classes without a valid excuse will receive 0% for attendance. Final letter grades will be determined by the total grade average based on the following scale: 90% and above A 80% 89.9% B 70% 79.9% C 60% 69.9% D Less than 60% F Under no circumstances will the grades be rounded upwards (e.g to 90, 79.9 to 80, etc.). Any requests of this kind will be ignored. AGEC 448/601, Syllabus -6-

7 COURSE OUTLINE AND CALENDAR Class # Date Day Topic Module Reading 1 Jan 14 Tue Introduction/Syllabus 2 Jan 16 Thu 3 Jan 21 Tue 4 Jan 23 Thu 5 Jan 28 Tue 6 Jan 30 Thu 7 Feb 4 Tue 8 Feb 6 Thu 9 Feb 11 Tue Futures Contracts and Markets 1 Ch. 4, and 8 9 Pricing Futures Contracts 2 10 Feb 13 Thu Guest Lecture, Technical Analysis 11 Feb 18 Tue Guest Lecture, Speculation 12 Feb 20 Thu 13 Feb 25 Tue 14 Feb 27 Thu 15 Mar 4 Tue 16 Mar 6 Thu Exam 1 Spring Break Mar 11 Mar 13 Tue Thu 17 Mar 18 Tue 18 Mar 20 Thu 19 Mar 25 Tue 20 Mar 27 Thu 21 Apr 1 Tue 22 Apr 3 Thu 23 Apr 8 Tue 24 Apr 10 Thu 25 Apr 15 Tue 26 Apr 17 Thu 27 Apr 22 Tue 28 Apr 24 Thu Exam 2 Ch. 2, 6, 11, and 12 Hedging with Futures 3 Ch. 13 Mechanics of Option Markets 4 Ch. 5 and 14 Properties of Option Prices 5 Ch. 16 Pricing Option Contracts 6 Ch Trading Strategies with Options 7 Ch. 15 Note: Reading is from Jarrow and Chatterjea. Allocation of time to specific topics is tentative and can change depending on the overall class progress. Due dates of other assignments will be announced in class. AGEC 448/601, Syllabus -7-

8 STUDENT NEEDS The Americans with Disabilities Act (ADA) is a federal anti-discrimination statute that provides comprehensive civil rights protection for persons with disabilities. Among other things, this legislation requires that all students with disabilities be guaranteed a learning environment that provides for reasonable accommodation of their disabilities. If you believe you have a disability requiring an accommodation, please contact Disability Services in Cain Hall, Room B118, or call For additional information visit ACADEMIC INTEGRITY Aggie Honor Code AN AGGIE DOES NOT LIE, CHEAT, OR STEAL OR TOLERATE THOSE WHO DO. Upon accepting admission to Texas A&M University, a student immediately assumes a commitment to uphold the Honor Code, to accept responsibility for learning, and to follow the philosophy and rules of the Honor System. Ignorance of the rules does not exclude any member of the TAMU community from the requirements or the processes of the Honor System. Visit for additional information. DISCLAIMERS This syllabus is a general plan for the course and may be adjusted at instructor s discretion as the semester progresses. Any such deviations will be announced to the class by the instructor and will supersede the corresponding provisions of this document. The materials provided in this course are for educational purposes only. The instructor and the TA accept no responsibility or liability for the contents of any textbook or course materials, whether linked to this course or not, or for any trading results or any consequences of any student or third person acting upon the contents of this course. The content is provided AS IS, AS AVAILABLE without warranty of any kind, either express or implied. The instructor and the TA are not responsible for nor do warrant or guarantee the accuracy or completeness of any information or analysis supplied in this course. They are neither Commodity Trading Advisors, nor Brokers, and do not make trade recommendations. No information contained herein constitutes a solicitation for the purpose of purchase or sale of any commodity, security, or investment, nor should it serve as the basis for any trading or investment decision. Any references to buying, selling, taking positions, or otherwise dealing in securities, commodities, derivatives, futures, and any and all financial instruments in the context of this course, in classroom, in the office, or otherwise are the views and opinion of the individuals only. AGEC 448/601, Syllabus -8-