THE UNIVERSITY of EDINBURGH

DEGREE REGULATIONS & PROGRAMMES OF STUDY 2016/2017

University Homepage
DRPS Homepage
DRPS Search
DRPS Contact
DRPS : Course Catalogue : Business School : Common Courses (Management School)

Postgraduate Course: Financial Engineering (CMSE11290)

Course Outline
SchoolBusiness School CollegeCollege of Humanities and Social Science
Credit level (Normal year taken)SCQF Level 11 (Postgraduate) AvailabilityNot available to visiting students
SCQF Credits15 ECTS Credits7.5
SummaryThis course will focus on the application of derivatives in addressing financial problems. There will be a focus on the the use of futures as risk-management and securities structuring instruments.
Course description An understanding of how derivatives are priced and used is part of the financial manager¿s core body of knowledge and understanding. (For instance, it is a fundamental part of the Chartered Financial Analyst (CFA) charter holder curriculum.) To meet this requirement, the course aims to provide students with the tools, knowledge and understanding of the derivative product set (these are forward and futures contracts, swaps and options), how the instruments are priced and the markets in which they are traded. The emphasis in the course is on financial management and pricing rather than the mathematics of derivatives. To integrate the discussion of these instruments, the course stresses the relationship that exists between derivatives and fundamental financial instruments (cash securities) and, in particular, the important no-arbitrage conditions that underlie the pricing of derivatives. Note that the course does not delve into the more advanced aspects of derivatives valuation such as stochastic processes, although an intuitive understanding of this is required. The course will also cover some non-standard instruments and securities since these now form an important element in financial markets. Financial Engineering involves a shift from focusing on ¿pricing¿ to the ¿application¿ of derivatives.

Syllabus

Introduction to financial engineering and derivatives
Forwards and Futures: pricing, types, special features of some contracts
Application of futures in securities design and risk management
Swaps pricing
Swaps applications
Options and option strategies
Pure option strategies
Options with fundamental securities
Option pricing (Black-Scholes-Merton and binomial)
extensions of option pricing
value leakage
Models for special asset types: embedded options
Introduction to financial engineering securities with options: the LYONS case
Options and corporate finance (Moody's KMV default prediction model)
Greeks of option pricing; creating option sensitivities
Financial engineering with exotic options

Student Learning Experience

Learning will primarily be through reading, thinking, class discussions, attending lectures and tutorials, and solving exercises, and attempting problems. Derivatives concepts can take time to absorb and students should expect to have to go over some ideas several times before they are understood properly.
Entry Requirements (not applicable to Visiting Students)
Pre-requisites Co-requisites
Prohibited Combinations Other requirements For Business School PG students only, or by special permission of the School. Please contact the course secretary.
Course Delivery Information
Academic year 2016/17, Not available to visiting students (SS1) Quota:  None
Course Start Semester 2
Timetable Timetable
Learning and Teaching activities (Further Info) Total Hours: 150 ( Lecture Hours 20, Seminar/Tutorial Hours 10, Online Activities 10, Formative Assessment Hours 10, Summative Assessment Hours 2.5, Revision Session Hours 1.5, Programme Level Learning and Teaching Hours 3, Directed Learning and Independent Learning Hours 93 )
Additional Information (Learning and Teaching) Self-study, class preparation, revision and researching, preparing and writing up assignments 93 hrs
Assessment (Further Info) Written Exam 40 %, Coursework 60 %, Practical Exam 0 %
Additional Information (Assessment) Individual assignment worth 20%
Mid-term exam worth 20%
Group assignment worth 20%
Final exam worth 40%
Feedback Students will get written feedback on all coursework. There will be general feedback on the mid-term exam and on the final exam.
Exam Information
Exam Diet Paper Name Hours & Minutes
Main Exam Diet S2 (April/May)2:00
Learning Outcomes
On completion of this course, the student will be able to:
  1. Explain and critically discuss the concepts behind financial engineering
  2. Understand how derivatives are used by financial practitioners to address problems in finance and investment
  3. Formulate and explain the approaches used in current methodologies used to price derivatives, and be able to price a variety of options using both analytical and numerical methods
  4. Have an understanding of the theory and practice of engineering of new financial products
  5. Explain and be able to apply option pricing to deal with the special nature of different types of underlier
Reading List
None
Additional Information
Graduate Attributes and Skills Not entered
Keywordsfin-FE
Contacts
Course organiserDr Peter Moles
Tel: (0131 6)50 3795
Email: P.Moles@ed.ac.uk
Course secretaryMiss Rachel Allan
Tel: (0131 6)51 3757
Email: Rachel.Allan@ed.ac.uk
Navigation
Help & Information
Home
Introduction
Glossary
Search DPTs and Courses
Regulations
Regulations
Degree Programmes
Introduction
Browse DPTs
Courses
Introduction
Humanities and Social Science
Science and Engineering
Medicine and Veterinary Medicine
Other Information
Combined Course Timetable
Prospectuses
Important Information
 
© Copyright 2016 The University of Edinburgh - 3 February 2017 3:38 am