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ES50154: Financial derivatives

[Page last updated: 15 October 2020]

Follow this link for further information on academic years Academic Year: 2020/1
Further information on owning departmentsOwning Department/School: Department of Economics
Further information on credits Credits: 5      [equivalent to 10 CATS credits]
Further information on notional study hours Notional Study Hours: 100
Further information on unit levels Level: Masters UG & PG (FHEQ level 7)
Further information on teaching periods Period:
Semester 2
Further information on unit assessment Assessment Summary: CW 100%
Further information on unit assessment Assessment Detail:
  • Coursework 1 (CW 50%)
  • Coursework 2 (CW 50%)
Further information on supplementary assessment Supplementary Assessment:
Like-for-like reassessment (where allowed by programme regulations)
Further information on requisites Requisites:
Description: Aims:
To provide an introduction to derivative securities including futures and options, their valuation and management.

Learning Outcomes:
At the end of this course, students should be able to: structure and construct portfolios including a variety of financial instruments; apply principles of arbitrage, hedging and risk management; apply and evaluate the Black-Scholes pricing theory, and construct valuations based on the Black-Scholes analysis.

Written communication, Numeracy, Time management and Organisational skills, Data acquisition, handling and analysis, Problem solving, Working independently, Critical/analytical skills, Precise thinking, Accuracy and attention to detail.

Introduction to derivatives, including futures and forward contracts, call and put options. Valuation of futures and forwards contracts. Time value of money, interest rates, bonds. Option pricing; put-call parity, trading strategies, arbitrage. Random asset price modelling. Introduction to stochastic calculus. The Black-Scholes analysis for pricing derivatives, including options. Other topics to be chosen from: interest rate swaps and their valuation, assets paying dividends, the binomial pricing model, risk management of options (delta, theta and gamma).
Further information on programme availabilityProgramme availability:

ES50154 is a Designated Essential Unit on the following programmes:

Department of Economics
  • THES-AFM30 : MSc Economics for Business Intelligence and Systems