| CODE | BFI5332 | ||||||||||||
| TITLE | Derivatives Markets | ||||||||||||
| UM LEVEL | 05 - Postgraduate Modular Diploma or Degree Course | ||||||||||||
| MQF LEVEL | 7 | ||||||||||||
| ECTS CREDITS | 5 | ||||||||||||
| DEPARTMENT | Banking, Finance and Investments | ||||||||||||
| DESCRIPTION | This study-unit builds on undergraduate knowledge in investments and finance and provides students with an advanced overview of the theory, tools, and terminology related to financial Derivative Markets. This study-unit offers an advanced understanding of financial derivatives: forwards, futures, swaps and options, and offers students different strategies of how to use these instruments to hedge and manage different types of financial risks. The study-unit uses an integrative graphical "building block" approach that integrates the topics covered in one unified framework. An attempt is made to simplify the mathematical content and to emphasize the understanding of the underlying economic and financial concepts. Successful completion of this study-unit enables students to acquire the advanced knowledge and skills required to pursue a career that involves providing and implementing investment advice. Study-Unit Aims: The study-unit aims to provide students with advanced knowledge of financial markets in both the four core financial derivatives: forwards, futures, swaps and options and their use to manage financial risks. It aims at covering in depth the arbitrage concept and how it is used in finance to price financial derivatives. The study-unit also aims at covering important aspects of how financial derivatives are used on a daily basis by practitioners in the field. Learning Outcomes: 1. Knowledge & Understanding: By the end of the study-unit the student will be able to: - Explain the concept of the risk profile; - Describe how financial risks can be hedged using forwards, futures, swaps and options; - Explain how forward and future prices are determined; - Describe the arbitrage conditions behind the development of the interest rate parity condition; - Explain how Forward Rate Agreements are determined; - Explain swaps and how their pricing is determined; - Describe options, both calls and puts, and their valuation; - Discuss the different trading strategies that can be developed with options; - Explain how the binomial option pricing model works and can be used to value options; - Explain the Black-Scholes option pricing model. 2. Skills: By the end of the study-unit the student will be able to: - Compute and identify different types of financial risks; - Identify financial derivatives to manage and hedge these financial risks; - Identify and select derivatives can be used effectively to mitigate the different risks that corporations face; - Identify and implement complex trading strategies using financial derivatives. Main Text/s and any supplementary readings: Main Texts: - Charles W. Smithson, Clifford W. Smith, Jr., and D. Sykes Wilford, "Managing Financial Risk", 1995, Irwin. - John C. Hull, "Options, Futures and Other Derivatives", seventh edition, 2008, Prentice Hall. Supplementary Readings: - Robert A. Strong, "Speculative Markets", second edition, 1994, Harper Collins. - Country D. Smith, "Option Strategies", second edition, 1996, Wiley. - Lawrence Galitz, "Financial Engineering: Tools and Techniques to Manage Financial Risk, revised edition, 1995, Pitman Publishing. - Peter Ritchken, "Derivative Markets: Theory, Strategy and Applications鈥�, 1996, Harper Collins. - Robert T. Daigler, "Financial Futures and Options Market鈥�, 1994, Harper Collins. |
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| ADDITIONAL NOTES | Pre-requisite Qualifications: B.Com. (Hons.) Banking & Finance, B.Com. Banking & Finance Major or equivalent | ||||||||||||
| STUDY-UNIT TYPE | Lecture | ||||||||||||
| METHOD OF ASSESSMENT |
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| LECTURER/S | Joseph Falzon |
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The University makes every effort to ensure that the published Courses Plans, Programmes of Study and Study-Unit information are complete and up-to-date at the time of publication. The University reserves the right to make changes in case errors are detected after publication.
The availability of optional units may be subject to timetabling constraints. Units not attracting a sufficient number of registrations may be withdrawn without notice. It should be noted that all the information in the description above applies to study-units available during the academic year 2025/6. It may be subject to change in subsequent years. |
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