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ES50154: Financial derivatives

[Page last updated: 14 August 2024]

Academic Year: 2024/25
Owning Department/School: Department of Economics
Credits: 5 [equivalent to 10 CATS credits]
Notional Study Hours: 100
Level: Masters UG & PG (FHEQ level 7)
Period:
Semester 2
Assessment Summary: CW 100%
Assessment Detail:
  • Coursework 1 (CW 60%)
  • Coursework 2 (CW 40%)
Supplementary Assessment:
ES50154 - Reassessment Paper (where allowed by programme regulations)
Requisites:
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.


Aims: To provide an introduction to derivative securities including futures and options, their valuation and management.

Skills: 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.

Content: 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).

Course availability:

ES50154 is a Designated Essential Unit on the following courses:

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

Notes:

  • This unit catalogue is applicable for the 2024/25 academic year only. Students continuing their studies into 2025/26 and beyond should not assume that this unit will be available in future years in the format displayed here for 2024/25.
  • Courses and units are subject to change in accordance with normal University procedures.
  • Availability of units will be subject to constraints such as staff availability, minimum and maximum group sizes, and timetabling factors as well as a student's ability to meet any pre-requisite rules.
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