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Durham University

Postgraduate Module Handbook 2021/2022

Archive Module Description

This page is for the academic year 2021-22. The current handbook year is 2022-23
No such Code for pgprog: L1K209
No such Code for pgprog: L1K309
No such Code for pgprog: L1K709
No such Code for pgprog: L1K809
No such Code for pgprog: L1K609
No such Code for pgprog: L1K509
No such Code for pgprog: L1K109
No such Code for pgprog: N3K809

Department: Economics and Finance

ECON41415: DERIVATIVE MARKETS

Type Tied Level 4 Credits 15 Availability Available in 2021/22
Tied to L1K209
Tied to L1K309
Tied to L1K709
Tied to L1K809
Tied to L1K609
Tied to L1K509
Tied to L1K109
Tied to N3K109 Finance
Tied to N3K209 Finance (Accounting and Finance)
Tied to N3K309 Finance (Corporate and International Finance) (Last intake of students October 2021)
Tied to N3K409 Finance (Finance and Investment)
Tied to N3K509 Finance (International Money, Finance and Investment) (Last intake of students October 2021)
Tied to N3K609 Finance (International Banking and Finance) (Last intake of students October 2021)
Tied to N3K709 Finance (Economics and Finance)
Tied to N3K809

Prerequisites

  • One module at a level equivalent to a second year British Honours Degree standard, covering statistics and in particular covering at least probability theory and distributions as well as hypothesis testing.

Corequisites

  • Advanced Financial Theory (ECON41215)

Excluded Combination of Modules

  • None

Aims

  • To develop students' ability to master the knowledge and understanding at an advanced level of the nature and uses of financial derivatives;
  • To provide students with the ability to critically review this specialised complex area of knowledge with a view to undertaking the study of risk management.

Content

  • Introduction to Derivative Markets;
  • Forwards and Futures Markets and Pricing;
  • Bonds and Swaps Pricing;
  • Option Markets and Properties;
  • Stochastic Calculus;
  • Binomial Tree Option Pricing Model;
  • Black-Scholes-Merton Option Pricing Model;
  • Exotic Options Properties and Pricing;
  • Structured Products;
  • Summary of Course.
  • Ethics and Sustainability issues will be highlighted where relevant.

Learning Outcomes

Subject-specific Knowledge:
  • have an advanced knowledge and critical understanding of the main derivative financial instruments, their uses and their differences;
  • have a critical understanding of the roles of arbitrage, speculation and hedging derivative financial markets, including the complexity and interactions inherent in these roles;
  • have explored, understood and appreciated the complexity and contradictions of the current relevant academic literature and its implications for professional practice, and be able to identify open questions for their own research.
Subject-specific Skills:
  • be able to use highly specialised and advanced technical and academic skills to analyse the pricing of different derivative instruments such as forwards, futures, swaps, and other financial options, and to be able to apprehend issues related to fixed income theory, stochastic calculus, the Black-Scholes option pricing model, stock index arbitrage and trading strategies;
  • be able to learn and work independently in the area of derivative markets, exercising critical judgement and discrimination in the resolution of complex problematic situations;
  • be able to apply problem solving and analytical skills to issues in derivative markets.
Key Skills:
  • Written Communication;
  • Planning, Organising and Time Management;
  • Problem Solving and Analysis;
  • Using Initiative;
  • Numeracy;
  • Computer Literacy.

Modes of Teaching, Learning and Assessment and how these contribute to the learning outcomes of the module

  • A combination of lectures, seminars and guided reading will contribute to achieving the aims and learning outcomes of this module. The summative written examination will test students' knowledge and critical understanding of the material covered in the module, their analytical and problem-solving skills.

Teaching Methods and Learning Hours

Activity Number Frequency Duration Total/Hours
Lectures 9 1 per week 2 hours 18
Seminars 4 1 hour 4
Preparation & Reading 126
Revision Session 1 2 hour 2
Total 150

Summative Assessment

Component: Examination Component Weighting: 100%
Element Length / duration Element Weighting Resit Opportunity
Unseen written examination 2 hours 100% Same

Formative Assessment:

Students will receive written comments on a formative written assignment. Additional formative assessment, and feedback, may take a number of forms such as oral feedback on work prepared by students for seminars; answers to questions either discussed during a seminar or posted on DUO.


Attendance at all activities marked with this symbol will be monitored. Students who fail to attend these activities, or to complete the summative or formative assessment specified above, will be subject to the procedures defined in the University's General Regulation V, and may be required to leave the University