FM441      Half Unit
Derivatives

This information is for the 2014/15 session.

Teacher responsible

Dr Rohit Rahi OLD 3.43

Availability

This course is available on the MSc in Accounting and Finance, MSc in Applicable Mathematics, MSc in Financial Mathematics, MSc in Risk and Stochastics, MSc in Statistics (Financial Statistics) and MSc in Statistics (Financial Statistics) (Research). This course is available with permission as an outside option to students on other programmes where regulations permit.

Pre-requisites

This is an advanced course. Students will be expected to show some familiarity with statistics, calculus and random processes.

Course content

The course provides a thorough grounding in the theory of derivatives pricing and hedging. Particular emphasis is placed on pricing within a multi-period, mostly continuous-time, framework. A special feature of the course is its coverage of the modern theory of no-arbitrage pricing using PDE and martingale methods. These methods are applied to the pricing of vanilla and exotic options, forwards, futures and fixed income derivatives. The uses of derivatives in hedging and risk-management are discussed as well.

Teaching

20 hours of lectures and 9 hours of seminars in the LT. 1 hour of seminars in the ST.

Formative coursework

Weekly problem sets in classes (10).

Indicative reading

Teaching notes will be distributed. No one book covers the entire course. The following books are recommended (in increasing level of difficulty): R. McDonald, Derivatives Markets, J Hull, Options Futures and Other Derivatives , and M Baxter & A Rennie, Financial Calculus.

Assessment

Exam (100%, duration: 2 hours) in the main exam period.

Students answer three out of four questions.

Key facts

Department: Finance

Total students 2013/14: 99

Average class size 2013/14: 12

Controlled access 2013/14: No

Lecture capture used 2013/14: No

Value: Half Unit

Guidelines for interpreting course guide information

Personal development skills

  • Problem solving
  • Application of numeracy skills
  • Commercial awareness
  • Specialist skills