Unit name | Derivatives |
---|---|
Unit code | ECONM3017 |
Credit points | 15 |
Level of study | M/7 |
Teaching block(s) |
Teaching Block 2 (weeks 13 - 24) |
Unit director | Professor. Nick Taylor |
Open unit status | Not open |
Pre-requisites |
None |
Co-requisites |
None |
School/department | School of Accounting and Finance - Business School |
Faculty | Faculty of Social Sciences and Law |
This unit begins by introducing options and options markets. The concept of risk-free arbitrage and other methods are used to develop the Black-Scholes option pricing formula. This is followed by a discussion of the extensions and refinements of the Black-Scholes model, together with an examination of implied standard deviations. The option pricing section of the unit ends with an analysis of the way in which many financial contracts can be interpreted as options, and the insights achieved by such interpretation. The unit ends with an examination of futures, their pricing and the way in which they can be used to hedge risk.
Students should:
Lectures, seminars
One formative computer-based test involving short questions that cover all learning outcomes. Some multiple choice questions, others requiring calculation. Summative assessment: 3-hour examination with approximately 8 short questions ranging over the whole syllabus (particularly including requirements to define and explain basic terminology and option functioning (LOs 1, 2, 3) together with two long questions particularly focusing on LOs 4, 5, 6.