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Unit information: Derivatives in 2017/18

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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
Faculty Faculty of Social Sciences and Law

Description

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.

Intended learning outcomes

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.

Teaching details

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.

Assessment Details

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.

Reading and References

John Hull, "Options, Futures and Other Derivative Securities", 2015, 9th Edition, Prentice Hall.

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