Module ECON414JN: DERIVATIVE MARKETS

Department: Economics and Finance

ECON414JN: DERIVATIVE MARKETS

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 (ECON412JN)

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;
• Forward Contracts;
• Futures Contracts;
• Fixed Income Theory;
• Swaps;
• Stock Index Arbitrage and Spread Trading;
• Option Contracts and Stochastic Calculus;
• Option Pricing Models;
• Hedging and Risk Management;
• Corporate Applications.

Learning Outcomes

• 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.

• 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.

• 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

Summative Assessment

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