Newcastle University

Aims

This module aims to provide students with a detailed understanding of options, futures, and other financial derivatives. Skills will be developed in basic pricing analysis, use of pricing models, and trading and hedging strategies.

Original Summary:
Financial derivatives such as options, futures and swaps are important financial instruments that are widely used for hedging risk and speculative trading.

Outline Of Syllabus

Semester 1 -
1 Introduction to module and derivatives
2 Futures and a revision of some statistical concepts
3 Hedging with Futures. Interest Rates
4 Futures and Forward pricing. Interest Rate Futures
5 Swaps. Introduction to Options
6 Stock options. Option Strategies.
7 Binomial option pricing

Semester 2 -
8 Options and the Black-Scholes-Merton Model
9 The Greeks and Volatility Smiles
10 Value at Risk
11 Credit Risk
12 Credit Derivatives
13 Exotic Options and new products
14 Course Overview and Revision

Teaching Rationale And Relationship

• Lectures provide the basic structure of the methods and theories that are introduced and an overview of the current issues.

• Seminars provide an opportunity to enhance understanding of the theoretical aspects of the module.

Assessment Rationale And Relationship

The assessment tests understanding of the theoretical and current issues.

Reassessment will be 100% exam.