This course covers options, forward contracts, futures contracts, and swaps; the concept of arbitrage; fundamental option price theorems, put-call parity; derivation of the binomial and Black-Scholes option pricing models; valuation of futures contracts; stock index, interest rate and currency futures; examples of hedging and speculation using options, futures and swaps; portfolio insurance; credit risk and interest-rate swaps; the swap spread versus the corporate-bond spread.

Lectures: 10 x 2 hours, Thursdays 14.00-16.00

Additional 1-hour revision lecture outwith regular teaching hours

Tutorials are held at various times and can be selected on MyCampus

None.

1. Oral assessment & presentation; Group; 12 minutes; 25%; ILOs 4.
2. Degree exam: in-person; Individual; 90 minutes; 75%; ILOs 1-3.

This course aims to:

■ Introduce students to options, futures, swaps and other derivative instruments and their use in asset management.

■ Develop students' ability to analyse complex processes and relationships in financial markets.

■ Familiarise students with numerical and computational skills appropriate for analysing asset prices and returns.

By the end of this course, students should be able to:

1. Use evidence from real life examples and relevant literature to explain what factors influence the prices of assets traded in financial markets;

2. Critically analyse and compare the derivative markets of forward, futures and options;

3. Analyse financial market situations and arguments made in a numerical or mathematical context;

4. Collaborate and work effectively in teams to analyse relevant financial data and effectively present the information to an audience.