FINN2117: Derivative Markets

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• To develop knowledge and understanding of theoretical concepts of derivative securities.
• To develop knowledge and understanding of pricing and practical application of derivative securities in financial markets.
• To develop the ability to evaluate academic literature in derivative markets.

• Introduction to financial risk and risk management and derivative markets.
• Hedging, speculation and arbitrage.
• Introduction to options markets.
• Properties of options.
• Option trading stratergies and hedging positions.
• Forward and futures markets.
• Forward and futures pricing.
• Hedging with futures contracts.
• Swap markets.
• Securitisation, collateralised debt obligations and credit default swaps.

Subject-specific Knowledge:

• On completion of this module students should have developed:
• Knowledge of prominent sources of financial risk and issues in financial risk management.
• Knowledge and understanding of the characteristics of a range of derivative securities.
• Appreciation of key issues in financial markets involving derivative securities and their role in hedging, speculation and arbitrage.

Subject-specific Skills:

• On completion of the module students should be able to:
• Apply technical and academic skills to analyse the functioning of derivative markets.
• Examine practical issues, practice problem solving and conduct analysis related to the operation of derivative markets, for example pricing of forwards and futures and the construction of derivative trading stratergies.

Key Skills:

• Written communication, through preparing solutions to problem sets.
• Planning and organisation, through planning study throughout the academic year and observing strict assessment deadlines.
• Problem solving, by applying analytical and quantitative skills in pricing and stratergy construction.
• Initiative, by exercising critical judgement in identifying and accessing relevant literature and other resources to support problem solving and assessment.
• Numeracy, by applying core mathematical and statistical skills to solve problems.
• Computer literacy, through using electronic resources, including those provided by external partners, to analyse and interpret financial positions and stratergies.

• Teaching is by lectures and small group sessions. Learning takes place through attendance at lectures, preparation for and participation in seminars and independent study.
• Formative assessment is by means of a multiple choice test.
• Summative assessment is by means of an in-person examination.

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