ECO-30048 - Risk Management with Derivatives
Coordinator: James M Steeley Tel: +44 1782 7 34356
Lecture Time: See Timetable...
Level: Level 6
Credits: 15
Study Hours: 150
School Office: 01782 733094

Programme/Approved Electives for 2019/20

Accounting and Finance Single Honours (Level 6)
Business Economics Single Honours (Level 6)


Available as a Free Standing Elective

No

Co-requisites

None

Prerequisites

None

Barred Combinations

None

Description for 2019/20

This module deals with risk management techniques that rely on the use of derivative contracts, i.e. options, forwards, and futures. The pricing of options and other derivatives depends on three key factors:
1. the volatility of the underlying assets;
2. the extensive use of arbitrage arguments to price assets; and
3. the present value and discounting procedures to value streams of cash flows.
Bringing these three elements together, drawing on methods learned in ECO-20007 (Finance 1) (or, previously, ECO-10017 Economics for Financial Markets and ECO-20041 Asset Pricing) and ECO-20051 (Finance 2) (or, previously, ECO-20044 Portfolio Choice), and deepening the understanding of each, it will be shown how complex derivatives, such as options, futures, and forward contracts can be analysed.

Aims
This module deals with risk management techniques that rely on the use of derivative contracts, i.e. options, forwards, and futures. The valuation of derivatives is based on present value, discounting and arbitrage procedures that have been trailed in ECO-20007 (Finance 1) (or, previously, ECO-10017 Economics of Financial Markets, and, ECO-20041 Asset Pricing) and ECO-20051 (Finance 2) (or, previously, ECO-20044 Portfolio Choice.) Bringing these three elements together and deepening the understanding of each, it will be shown how complex derivatives, like options and futures contracts can be analysed.

Talis Aspire Reading List
Any reading lists will be provided by the start of the course.
http://lists.lib.keele.ac.uk/modules/eco-30048/lists

Intended Learning Outcomes

analyse and understand the role of derivatives markets: 1
demonstrate an understanding of the role of arbitrage in the determination of the prices of derivatives: 1,2
demonstrate knowledge of the alternative mathematical models and techniques to price derivatives
: 1,2
critically evaluate alternative derivative trading strategies: 2
demonstrate the use of options and futures for hedging, arbitrage and speculative activity: 2
enhance numeracy skills and problem solving skills: 1,2

Study hours

24 hours lectures,
5 hours tutorials,
2 hour exam,
25 hours class preparation,
94 hours independent study.


School Rules

None

Description of Module Assessment

1: Class Test weighted 40%
50 minute class test
50 minute problem solving class test

2: Unseen Exam weighted 60%
2 hour unseen examination
2 hour unseen examination covering the whole module syllabus