Shanghai Jiao Tong University · Summer School 2026
Risk Management & Derivatives
Forwards, futures, swaps and options, taught from John C. Hull. The course starts with how these contracts trade, then uses arbitrage to value them, and covers hedging, speculation, swaps, securitisation and the 2007–08 crisis. Every lecture comes with a lecture deck, a revision summary and an in-class activity.
Course materials
New · interactive companion
Watch one option trade, step by step
A real AAPL $130 call, bought in April 2015 and followed day by day to expiry: the earnings pop, the summer fade, and the decision to sell rather than exercise. Then pick your own position and strike and run it down the same real path.
Companion to Lecture 9 · Mechanics of Options Markets. Share prices are real; option premiums are Black–Scholes reconstructions, clearly marked throughout.
Stage 1 of 6 · You buy the call
Course overview
A derivative is a contract whose value depends on an underlying asset, such as a stock, bond, interest rate, currency or commodity. Exchange-traded futures and options, over-the-counter swaps, structured products and credit derivatives form a large part of modern finance. The course introduces the instruments, the markets in which they trade, and the arbitrage arguments used to price them. It also covers their use in hedging, speculation and risk transfer.
The course is organised in three blocks: forwards, futures and hedging; interest rates, swaps and the credit crisis; and options, including mechanics, properties and trading strategies. Each instrument is introduced through its market setting: exchanges, clearing houses, margining, day-count conventions and quotation conventions. Pricing then follows from arbitrage applied to real markets such as SOFR, Treasury futures, CME and ICE contracts, and the 2008 crisis.
Learning outcomes
- describe the main derivatives, forwards, futures, swaps and options, and the markets they trade in, and distinguish hedgers, speculators and arbitrageurs;
- explain the mechanics of futures markets, including the clearing house, margining and marking-to-market, and design hedging strategies, including the minimum-variance hedge ratio and hedging an equity portfolio with index futures;
- measure interest rates and the term structure (zero rates, forward rates, SOFR), and price interest-rate futures and interest-rate swaps off the zero curve;
- use arbitrage and cost-of-carry arguments to determine forward and futures prices on investment assets, currencies and commodities;
- explain securitisation, structured credit and the 2007–08 financial crisis;
- describe the mechanics of options markets, derive the bounds and put–call parity for stock options, and construct option trading strategies, including spreads, straddles and combinations.
At a glance
| Day | Session | |
|---|---|---|
| Week 1: Forwards, futures & hedging | ||
| Mon 29 Jun | L1 · Introduction to Derivatives | |
| Tue 30 Jun | L2 · Futures Markets and Central Counterparties | |
| Wed 1 Jul | L3 · Hedging Strategies Using Futures | |
| Thu 2 Jul | Quiz 1 (L1–3) | |
| Fri 3 Jul | L4 · Interest Rates | |
| Week 2: Forward prices, swaps, credit & into options | ||
| Mon 6 Jul | L5 · Forward & Futures Prices | |
| Tue 7 Jul | L6 · Interest Rate Futures | |
| Wed 8 Jul | Quiz 2 (L4–6) · L7 · Swaps | |
| Thu 9 Jul | L8 · Securitisation & the Credit Crisis | |
| Fri 10 Jul | Midterm Examination (L1–6) | |
| Week 3: Options, properties & strategies | ||
| Mon 13 Jul | L9 · Mechanics of Options Markets | |
| Tue 14 Jul | Quiz 3 (L7–8) + Empirical Analysis | |
| Wed 15 Jul | L10 · Properties of Stock Options | |
| Thu 16 Jul | Group Project Presentations | |
| Fri 17 Jul | Final Examination (L7–10) | |
