Credit Points 10

Legacy Code 51169

Coordinator Peter Kavalamthara Opens in new window

Description This subject provides an introduction to the major classes of derivatives: forwards, futures, swaps and options. These are studied in detail with the objective of elucidating the ways in which these instruments can be used for the purposes of hedging, speculation and arbitrage. In addition to the analysis of derivative usage and market growth, considerable attention is given to the objective of gaining an understanding of the fundamentals of derivative pricing.

School Business

Discipline Business And Management

Student Contribution Band HECS Band 4 10cp

Level Postgraduate Coursework Level 7 subject

Restrictions

Students must be enrolled in a postgraduate Business program.

Learning Outcomes

On successful completion of this subject, students should be able to:

1. Evaluate the operational mechanics of derivatives trading;
2. Analyse the roles of the key participants in derivatives markets;
3. Evaluate the institutional and organisational structure of key derivatives markets;
4. Analyse the theoretical background to derivatives pricing such as cash and carry arbitrage and probability-based models;
5. Explain the history of derivatives markets and risk management generally.

Subject Content

The nature of derivatives
Mechanics of futures markets
Hedging strategies
Using derivatives for risk management
Determination of forward and futures prices
Interest rate futures
Swaps
Mechanics of options markets
Properties of stock options
Trading strategies involving options
Introduction to option pricing models