Options and Futures
Essex Business School
Autumn & Spring
Undergraduate: Level 6
Thursday 03 October 2019
Friday 20 March 2020
08 November 2019
Requisites for this module
BSC N420JS Accounting and Finance,
BSC N390JS Banking and Finance
This is an introductory module on options and futures, with five weeks allocated to each. For both halves of the module, we start off by defining the respective derivative contract, continue on to examining in detail how it is traded and then delve into its pricing and risk management/trading applications. The module is highly quantitative, with a total of nine weekly classes intended to go over a large quantity of numerical problems.
The primary aim of this module is to give the students a good basic understanding of option, forward and futures contracts. Derivatives’ payoffs, their pricing and their uses in hedging will be main focus.
On successful completion of the module, students will be able to:
- Describe futures and options contracts with precision
- Place within the context of credit risk mitigation the mechanics of how futures and
options markets operate
- Identify an appropriate futures or options-based strategy to fulfill an investment
- Determine equilibrium futures contract prices
- Use binomial trees and the Black-Scholes model to price options.
- Quantify and manage portfolio risk exposure using option deltas.
Skills for Your Professional Life (Transferable Skills)
Upon successful completion of the module, students should be able to:
- Develop effective hedging strategies for a variety of business contexts such as receipt of income in foreign currency, fixing raw material/fuel costs, foreign acquisitions, etc.
- Develop effective and efficient derivatives-based trading strategies that suit a wide variety of investment views.
- Be able to quantify risks associated with derivatives positions, report these professionally and comment on them.
- Be able to price options and anticipate how option prices will react when the underlying parameters change in the market.
The module material will be delivered in the following way:
* 2 hours of lectures per week;
* Weekly workshops.
- Hull, John. (2018) Options, futures, and other derivatives, New York: Pearson Education.
The above list is indicative of the essential reading for the course. The library makes provision for all reading list items, with digital provision where possible, and these resources are shared between students. Further reading can be obtained from this module's reading list.
Module supervisor and teaching staff
Thanos Verousis and Cheng Yan
No external examiner information available for this module.
Available via Moodle
No lecture recording information available for this module.
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