Programme/Approved Electives for 2020/21
Available as a Free Standing Elective
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.
Talis Aspire Reading ListAny reading lists will be provided by the start of the course.http://lists.lib.keele.ac.uk/modules/eco-30048/lists
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.
Intended Learning Outcomes
analyse and understand the role of derivatives markets: 1demonstrate an understanding of the role of arbitrage in the determination of the prices of derivatives: 1,2demonstrate knowledge of the alternative mathematical models and techniques to price derivatives: 1,2critically evaluate alternative derivative trading strategies: 2demonstrate the use of options and futures for hedging, arbitrage and speculative activity: 2enhance numeracy skills and problem solving skills: 1,2
24 hours lectures,5 hours tutorials, 2 hour exam,25 hours class preparation, 94 hours independent study.
1: Class Test weighted 40%
Description of Module Assessment
50 minute class test50 minute problem solving class test2: Unseen Exam weighted 60%
2 hour unseen examination2 hour unseen examination covering the whole module syllabus