| CODE | INS5030 | ||||||||||||
| TITLE | Derivatives | ||||||||||||
| UM LEVEL | 05 - Postgraduate Modular Diploma or Degree Course | ||||||||||||
| MQF LEVEL | 7 | ||||||||||||
| ECTS CREDITS | 5 | ||||||||||||
| DEPARTMENT | Insurance and Risk Management | ||||||||||||
| DESCRIPTION | The main theme of the study-unit is to evaluate the pricing and use of such financial instruments for institutions operating in an environment of fluctuating exchange rates, differential international rates of inflation, differing money market conditions and government regulation. Our focus throughout will be on interest rate and currency products rather than equity-related derivatives. While derivatives is one of the most mathematically sophisticated areas of finance, users of derivatives need to be able to explain the fundamental principles of derivative pricing and risk management in a conceptual manner without the use of advanced mathematical modeling. This study-unit provides a formal and rigorous approach to financial derivatives, yet also one which is intuitive and accessible without the use of advanced mathematics. The study-unit will have a strong applied orientation, and case study/problem solving material will be used whenever appropriate. The study-unit assumes that the student has a basic knowledge of the major international financial markets from previous courses. Study-Unit Aims: Derivative contracts are essential for the smooth operation of financial markets. However, because they have the potential to increase the volatility of financial markets, it is essential to have an in-depth understanding of how they work and how they are priced and traded. Therefore, the study-unit aims at providing an in-depth critical understanding and knowledge of options, forwards, futures and swaps, and their application in risk management. The module aims to cover a full range of the most important options and futures contracts, including those traded on stock indices, commodities and credit instruments. Moreover, it aims to provide an advanced understanding of pure theories of derivative finance, their empirical strengths in the light of applied econometric studies, and their application in the context of markets and economies. Learning Outcomes: 1. Knowledge & Understanding: By the end of the study-unit the student will be able to: 1. demonstrate conceptual and practical knowledge of the role of volatility in pricing options and the concept of a volatility smile; 2. demonstrate conceptual and practical knowledge of the concept of put-call parity and other basic option portfolio strategies such as straddles, collars, butterfly spreads etc; 3. assess basic properties and characteristics of the major credit derivative instruments. 2. Skills: By the end of the study-unit the student will be able to: 1. analyse the fundamental concepts of derivatives; 2. employ derivatives for Portfolio Management and hedging of financial risk; 3. carry out trades using derivatives. Main Text/s and any supplementary readings: Main Texts: - J.Hull. 2016. Fundamentals of Futures and Options Markets, Pearson, 8th Edition. |
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| STUDY-UNIT TYPE | Lecture | ||||||||||||
| METHOD OF ASSESSMENT |
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| LECTURER/S | Philip M. Beattie |
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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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