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| Module Availability |
| Autumn |
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| Assessment Pattern |
| Unit(s) of assessment |
Weighting Towards Module
Mark (%)
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| 2 hour Examination |
70
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| Coursework 1 |
10
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| Coursework 2 |
20
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Qualifying Condition(s)
A weighted aggregated mark of 40% is required to pass the module |
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| Module Overview |
| The module introduces in some detail the workings of derivative financial markets and securities. Securities such as options and futures have been traded in organised exchanges, as well as over the counter, for decades. The markets for derivative products are innovative and new instruments are frequently introduced to facilitate risk-hedging or speculative investor operations. Our emphasis is on the pricing of these financial instruments, as well as their applications in the real world for relevant investment functions, including hedging and speculation. Regulatory issues for options and futures markets emanating from the 2008 crisis are also discussed |
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| Prerequisites/Co-requisites |
| None |
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| Module Aims |
The aim of the module is to facilitate a deep understanding of derivative financial markets and the securities traded on them |
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| Learning Outcomes |
On successful completion of this module you should be able to
- discern the characteristics and operations of foward, futures and options markets
- understand how derivative securities can be used for hedging and speculative activities
- identify the determinants of option premiums and be able to price option contracts using appropriate techniques
- apprciate the adoption of option strategies to suit particular expectations about the future direction and magnitude of the underlying asset price movements
- use parameters that provide information about the relationship between the price of an option and the underlying asset price, the contract's time to expiration, etc
Transferable Skills
- problem solving
- financial market awareness
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| Module Content |
The following is an indication of the likely topics to be covered:-
- mechanics of futures markets
- interest rates
- forward and futures prices
- mechanics of options markets
- properties of stock options
- trading strategies using options
- binomial tress of option pricing
- Weiner Processes and the Black Scholes model
- Delta hedging
- volatility smiles
- value at risk
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| Methods of Teaching/Learning |
| Lectures (11) |
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| Selected Texts/Journals |
Main texts
Hull, J.C. 2009, Options, Futures and Other Derivatives, Prentice Hall, 7th edition
Additional resources:
Hull, J.C. 2008, Fundamentals of Futures and Options Markets, Prentice Hall, 6th edition
Hull J. & White A, 1996, Hull-White on Derivatives: A Compilation of Articles, Risk Publications
Hoek, J. van der & Elliott R.J. 2006, Binomial Models in Finance, Springer
Neftci A. N. 2000, An Introduction to the Mathematics of Financial Derivatives, 2nd edition, Academic Press
Sundaram, R.K, & Das S. R, 2009, Derivatives Principles and Practice |
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| Last Updated |
10 March 2011 |
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