Derivatives - (currently under development) [C333]
Introduction
The expansion of financial markets since 1973 has been founded on the growth of derivatives, both over the counter derivative contracts and exchange traded contracts. It was made possible by the development of models for valuing derivatives based upon the mathematics of stochastic calculus. In this course you learn the application of those principles to the valuation of derivatives.
Aims & Objectives
By the end of this course you will be able to:
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Apply the principles of hedging and dynamic hedging;
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Understand the Black-Scholes model and its applications:
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Calculate delta and other measures of sensitivity;
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Evaluate interest rate swap contracts;
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Discuss the role of credit derivatives in risk management;
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Apply appropriate numerical methods for analysing derivatives.
Resources
Course study guide
Students receive a looseleaf binder containing eight ‘course units’; these texts are carefully structured to define the main concepts and issues, locate these within current knowledge and guide your study of the textbook and articles in the reader.
Textbook
Students receive, at no extra charge, a leading modern textbook on derivatives.
Reader
A selection of core readings, in the form of academic articles on derivatives are provided in a course reader.
Course Timetable
The course timetable shows the linkage between the various components of the course and indicates the study and assignment schedule.
Course Content
1.
Principles and applications of hedge portfolios
2. Properties of stock options
3. Analytics of the Black-Scholes model
4. Greek letters, dynamic hedging and trading
strategies
5. Interest rate models and swaps
6. Credit derivatives
7. Some exotic options
8. Further numerical procedures
Tuition & Assessment
You
will complete two Assignments which will be marked
by your tutor. Assignments are each worth 15% of
your total mark. You will be expected to submit your
first assignment by the Tuesday of Week 5, and the
second assignment at the end of the course, on the
Tuesday after Week 8. Assignments are submitted and
feedback given online. In addition, queries and
problems can be answered through the Online Study
Centre.
You will also sit a three-hour examination on a
specified date in October, worth 70% of your total
mark. An up-to-date timetable of examinations is
published on the website in April each year.