BE351-7-SP-CO:
Derivative Securities

The details
2019/20
Essex Business School
Colchester Campus
Spring
Postgraduate: Level 7
Current
Monday 13 January 2020
Friday 20 March 2020
20
24 September 2019

 

Requisites for this module
(none)
(none)
(none)
(none)

 

BE361

Key module for

MSC N30012 Finance,
MSC N34212 Financial Engineering and Risk Management,
MSC N30112 International Finance,
MSC N35112 Finance and Global Trading,
MPHDN30048 Finance,
PHD N30048 Finance

Module description

This module focuses on the pricing of financial derivatives and their use for hedging financial risks. We start with the basics of two of the most important derivatives, futures and options. This is followed by an extensive analysis of the most widely used option pricing models, the Black-Scholes model and the binomial model and various numerical techniques for pricing financial derivatives. Futures and options are then utilised in the context of hedging financial risks. By relaxing the rigid assumptions underlying the Black-Scholes formula, alternative option pricing models are presented. Students will be provided with computer exercises that will illustrate the practical implementation of the models introduced in the module.

Module aims

The aim of this module is to provide students with an understanding of the pricing of financial derivatives and their use in hedging financial risks.

Module learning outcomes

On successful completion of the module, students will be able to:
• Understand the main types of derivatives and how they can be used to hedge risks;
• Devise trading strategies and arbitrage strategies with derivative securities;
• Understand the main concepts and methodologies underlying financial option pricing;
• Understand extensions to the Black and Scholes option pricing model


Skills for Your Professional Life (Transferable Skills)

Critical Thinking: By studying the way derivatives work and the theoretical foundations of some widely employed pricing models students will be able to understand the assumptions used by these models and critically analyse them. This will allow students to appreciate the usefulness/weakness of these models, and understand why sometimes they work/fail in practice. This type of knowledge is particularly useful in areas such as investment banking and asset management.

Module information

No additional information available.

Learning and teaching methods

Weekly lectures and classes. There are also computer labs to consolidate and apply the knowledge obtained. Lecture notes will be uploaded to Moodle. Students are expected to read the relevant material and prepare ahead of the lectures. It is also strongly recommended that students read the additional material to supplement the lectures. Students should be aware that this module relies heavily on quantitative methods.

Bibliography

  • 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.

Assessment items, weightings and deadlines

Coursework / exam Description Deadline Weighting
Written Exam In-class Test 100%
Exam 120 minutes during Summer (Main Period) (Main)

Overall assessment

Coursework Exam
50% 50%

Reassessment

Coursework Exam
0% 100%
Module supervisor and teaching staff
Dr Luiz Vitiello
E: ebspgtad@essex.ac.uk

 

Availability
Yes
No
Yes

External examiner

Dr Nikolaos Papanikolaou
Bournemouth University
Senior Lecturer in Accounting & Finance
Resources
Available via Moodle
Of 39 hours, 32 (82.1%) hours available to students:
7 hours not recorded due to service coverage or fault;
0 hours not recorded due to opt-out by lecturer(s).

 

Further information
Essex Business School

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