FM360: Options, Futures and Other Financial Derivatives

This course covers the concepts and models underlying the modern analysis and pricing of financial derivatives. The philosophy of the course is to first provide firm foundations for understanding derivatives in general.

The required technical tools will be explained carefully, allowing students to learn the language and to be able to converse with derivatives professionals. Once the tools are in place, those same tools can then be applied to any derivative. Special emphasis will be put on those derivatives that shape the modern world.

The first half of the course involves the review of the required tools, the setup of the pricing framework, the intuition of the methodology and the application to plain vanilla derivatives.

The second half of the course applies those techniques to more advanced topics: exotic derivatives, volatility modelling (including stochastic volatility, local volatility and volatility derivatives such as variance swaps) and interest-rate derivatives.

The pricing and hedging tools come to life in applied case studies, ranging from rogue traders bringing down major financial institutions to the recent meme stock frenzy driven by social media.

Prerequisites: Calculus and statistics at intermediate undergraduate level. 

Level: 300 level. Read more information on levels in our FAQs

Fees: Please see Fees and payments

Lectures: 36 hours

Classes: 18 hours

Assessment: Mid-session exam (50%), and final exam (50%)

Typical credit: 3-4 credits (US) 7.5 ECTS points (EU)

Please note: Assessment is optional but may be required for credit by your home institution. Your home institution will be able to advise how you can meet their credit requirements. For more information on exams and credit, read Teaching and assessment

This course is suited to students wanting to build a firm and in-depth foundation for understanding derivatives, and enhance their technical skills surrounding these.

If you are targeting a career in Trading, Hedge Funds, Investment Banking or Commercial Banking then you should consider this course.

The underlying philosophy of the course is to first provide firm foundations for understanding derivatives in general.

The design of this course is guided by LSE faculty, as well as industry experts, who will share their experience and in-depth knowledge with you throughout the course.