This module is not currently running in 2024 to 2025.
This module is concerned with derivative securities used by the investors for hedging (risk management), speculation and arbitrage purposes. In this module students learn about various derivative instruments such as forwards, futures and options contracts on a range of different underlying assets. These underlying assets could be physical assets such as commodities (gold, oil, etc.) or financial securities (currencies, stocks, etc.). Students also learn about how these derivative instruments are valued. The main focus behind the use of these derivatives would be from risk management perspective. More specifically, this module aims to cover the following topics:
- Types of derivative instruments and their characteristics
- Forward contracts and their valuation
- Futures contracts and their valuation
- Options contracts and their valuation
- Uses of derivatives in portfolio management
The module will be taught by lectures, seminars and private study.
Total Contact Hours: 32
Private Study Hours: 118
Main assessment methods
VLE test: 10%
MCQ in-course test – 45 minutes: 20%
Examination - two-hour, unseen: 70%
Reassessment methods
100% examination
- Hull, J. C. (2011), Fundamentals of Futures and Options Markets, 7th Edition, London: Pearson Education
- Brealey, A., Myers, S., and Allen, F. (2017) Principles of Corporate Finance, Global Edition, 12th Edition. New York: McGraw Hill Education
- Hillier, D., Ross, S., Westfield, R., Jaffe, J., and Jordan, B. (2013) Corporate Finance, 2nd European Edition, London: McGraw-Hill
- Pirie, W.L. (2017) Derivatives, CFA Institute Investment Series, Chichester: Wiley.
8. The intended subject specific learning outcomes.
On successfully completing the module students will be able to:
8.1 Demonstrate knowledge and critical understanding of common derivative instruments, their characteristics and potential uses.
8.2 Use derivative instruments for risk management and arbitrage purposes.
8.3 Demonstrate knowledge and critical understanding of how to value forward, futures, and options contracts.
8.4 Value derivative instruments using alternative methods.
9. The intended generic learning outcomes.
On successfully completing the module students will be able to:
9.1 Research, plan, and work independently.
9.2 Understand risk management and arbitrage techniques.
9.3 Apply quantitative and problem solving techniques to complete or abstract data.
9.4 Critically evaluate arguments and assumptions, and make judgements to offer alternative solutions.
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