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

ECO-20044


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 as discussed in ECO-20041 (Asset Pricing); and
3. the present value and discounting procedures to value streams of cash flows as analysed in ECO-10017 (Economics of Financial Markets) and ECO-20044 (Portfolio Choice).
Bringing these three elements together and deepening the understanding of each, it will be shown how complex derivatives, such as options, futures, and forward contracts can be analysed. Derivative-like securities such as warrants and convertible bonds are often used by companies as part of their financing activities and may be discussed in Corporate Finance.

Aims
This course 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 arbitrage arguments as discussed in ECO-20011 (Asset Pricing) and the present value and discounting procedures to value streams of cash flows as analysed in ECO-10017 (Economics of Financial Markets) and 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; will be achieved by assessments: 1,2
enhance numeracy skills and problem solving skills; will be achieved by assessments: 1,2
critically evaluate alternative hedging strategies; will be achieved by assessments: 1,2
demonstrate the use of options and futures for speculative activity; will be achieved by assessments: 1,2
demonstrate the use of derivatives for arbitrage activity. will be achieved by assessments: 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 20%
50 minute class test
50 minute problem solving class test

2: Unseen Exam weighted 80%
2 hour unseen examination
2 hour unseen examination covering the whole module syllabus