Johnson School of Management, Cornell University
Equity Derivatives and Related Products
Professor Mark Zurack
August 31, 2010
Successful investing in Equities Markets requires more than just picking stocks given the wide array of products at a
portfolio manager's disposal. This course is intended to explain how derivative products like Options, Futures, ETFs,
Structured Notes, Credit Default Swaps and Convertible Bonds are structured, valued, and used by all types of investors
The course is designed from both the perspective of the trader who has to account for
the real world costs of hedging
derivatives and the investor who cares primarily
how the derivative can improve the return and/or reduce the risk of his/
her portfolio. It should complement other classes you have had on derivatives.
My course notes have been, developed from the experiences I have had working with institutional and private clients for
18 years at Goldman Sachs.
The course is broken into two sections:
- The course starts with a discussion of ”Delta 1” equity derivatives like Indices, Exchange Traded
Funds, Futures, and Swaps. These products trade dollar for dollar with the underlying security. We then explore
options based Equity and Credit products, like Equity Options, Structured Notes, Credit Default Swaps and
Convertible Bonds. The goal of this portion of the course is to focus on what real world factors influence trading in
these products and show how they are linked to one another.
– A large component of this course involves exploring how investors use these products. Some
investors like Pension, Mutual and Hedge Funds are driven by economic and risk management needs solely in their
use of Equity Derivatives. Corporations, Individuals and Insurance Companies worry about Accounting, Legal and
Tax considerations, so any discussion of how they use Derivatives requires we cover those issues.
The material will be delivered through a combination of lectures, guest speakers, case studies and readings. Guest
speakers include trading and research business leaders at investment banks, pension funds, as well as investment