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The use of computer simulation in business education has become so widespread that it now considered a standard educational tool. There are now many different business management simulations available, which target different aspects of business management at various levels of student preparation and background. Despite this, not all areas of instruction have available focused specialty simulations which provided real-world level of detail and complexity. Financial derivatives trading has until recently been one of these areas lacking simulations. However, the recent trend of financial services firms offering up their trading platforms in simulation format has significantly changed the situation. This paper discusses this development and the use ofone such trading-platform-based simulation in a senior-level undergraduate financial derivatives course.
Keywords: Simulations, Options, Futures
Disciplines of Interest: Financial Derivatives, Investments
INTRODUCTION
Using computer-based simulations in the classroom has become common as the level of computer technology has advanced and the number of simulation software packages has increased. In teaching investment management, the use of computer-based simulated trading has become the norm, at least in capstone-level courses.
Recently, many brokerage firms have begun to make access to their actual trading platforms available to prospective clients. As a recruitment tool, the individual is given access to the full capabilities of the firm's trading platform and is allowed to trade "paper money." While most such offers are available to individuals, a limited number of firms have recognized the potential benefits of offering group simulated trading opportunities to those in academic settings.
The key additional required attribute is the ability to create and manage groups of simulated traders for specific periods, with specific constraints as to types of securities traded, types of trades allowed, notional investment balances, and so forth. With the addition of these group creation and management features, a financial firm's trial run trading program becomes a very realistic basis for formatted simulated trading exercises in an organized course setting.
However, not all financial firms understand the potential benefits of having their platforms used by prospective future professional clients while these prospects are still engaged in preparatory coursework. The author's experience includes interactions with representatives of firms that jealously guarded access to their platform and with those who didn't understand the need for an educator to be able to...