Business and management studies

Financial Derivatives

Module code: N1559
Level 5
15 credits in spring teaching
Teaching method: Lecture, Seminar
Assessment modes: Open examination, Coursework

You examine the markets and look at the trading and valuation of common derivative products such as forwards/futures, swaps and options, as well as equity and interest rate markets.

You look at practical applications of derivatives for hedging or investment purposes, including risk-return profiles, advantages and limitations.

You also explore fundamental concepts of no arbitage and risk neutral pricing and examine the Black Scholes formula. 

Module learning outcomes

  • Describe the function of derivatives in financial markets and discuss their advantages and limitations.
  • Identify the main derivatives commonly traded in equity and interest rate markets, as well as some of the more exotic instruments.
  • Explain the concept of no arbitrage and recognize the central role it places in derivatives pricing
  • Implement the binomial tree and Black-Scholes models to find the no arbitrage price of a range of derivative securities. Understand the assumptions and limitations of the approach