| 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 |
The aim of this unit is to provide an introduction to the pricing of the major derivative securities (that is, forwards/futures, swaps and options), and a training in the use of derivatives in managing risk. The unit is technical in nature.
On completion of this unit students should be able to (inter alia):
1. Understand how financial derivatives are valued based on no-arbitrage pricing and risk-neutral valuation, and how these instruments can be used to implement risk management strategies.
2. Critically discuss the practical usefulness of the Black-Scholes-Merton option pricing model.
3. Appreciate the latest developments in derivative modelling, and understand the latest problems in pricing complex derivatives.
The material will be delivered via one two-hour lecture per week. In addition, tutorial questions will be distributed, with tutorials taking place at designated times during the term. Each student will attend four tutorials.
Summative Assessment: 3 hour written exam (tests ILOs 1, 2 and 3).
Students are supplied with normal tables but no formula sheet. Please note that the questions can pertain to ANY of the topics covered.
Formative Assessment: Tutorial questions (tests ILOs 1, 2 and 3). Student solutions are inspected in each tutorial with feedback provided. Students are provided with soft and hard copies of the solutions to all tutorial questions at the end of each tutorial. Solutions to past exams and a mock exam are made available on Blackboard.
John Hull, "Options, Futures and Other Derivative Securities", 2015, 9th Edition, Prentice Hall.
