Derivatives (P00231)

? Credit Points : 20 ? SCQF Level : 11 ? Acronym : MSE-P-Derivs

This course will describe the nature of derivatives, including futures, options and swaps. Students will learn how arbitrage pricing operates and sets prices in a competitive market. Option-pricing models and extensions to the basic models will be studied. Students will learn how to price futures contracts, interest-rate and cross-currency swaps and options. The uses of derivatives for risk management and investment strategies will be considered. Students should also learn how to apply their knowledge of arbitrage pricing models to undertake financial engineering. The relationships and parity conditions that exist between various derivatives will also be discussed.

Entry Requirements

? Pre-requisites : PGs only

? Costs : Financial or Scientific Calculator (approximately £20)

Subject Areas

Home subject area

Common Courses (Management School and Economics), (Management School and Economics, Schedule H)

Delivery Information

? Normal year taken : Postgraduate

? Delivery Period : Semester 2 (Blocks 3-4)

? Contact Teaching Time : 2 hour(s) per week for 10 weeks

Summary of Intended Learning Outcomes

At the end of the course, students should be able to formulate and explain the rationale behind the current methodologies used to price derivatives, and be able to justify the prices at which derivatives are traded. They will develop their numerical skills and be able to use a financial or scientific calculator in solving numerical problems in finance. Students should be able to formulate strategies using financial derivatives and undertake simple financial engineering.

Assessment Information

Assessment will be via a two-hour examination at the end of semester one (70% of the final mark) and a brief essay during the semester (30% of the final mark).