ULMS Electronic Module Catalogue

The information contained in this module specification was correct at the time of publication but may be subject to change, either during the session because of unforeseen circumstances, or following review of the module at the end of the session. Queries about the module should be directed to the member of staff with responsibility for the module.
Title DERIVATIVE SECURITIES
Code ECON310
Coordinator Dr EM Apps
Economics
E.Apps@liverpool.ac.uk
Year CATS Level Semester CATS Value
Session 2021-22 Level 6 FHEQ First Semester 15

Pre-requisites before taking this module (other modules and/or general educational/academic requirements):

ACFI103 INTRODUCTION TO FINANCE; ECON112 STATISTICS FOR ECONOMICS AND BUSINESS; ACFI103 INTRODUCTION TO FINANCE; ACFI204 FINANCIAL MANAGEMENT; ECON112 STATISTICS FOR ECONOMICS AND BUSINESS; ACFI204 FINANCIAL MANAGEMENT 

Modules for which this module is a pre-requisite:

 

Programme(s) (including Year of Study) to which this module is available on a required basis:

 

Programme(s) (including Year of Study) to which this module is available on an optional basis:

 

Teaching Schedule

  Lectures Seminars Tutorials Lab Practicals Fieldwork Placement Other TOTAL
Study Hours   6

      12

18

36
Timetable (if known)   60 mins X 1 totaling 6
 
      60 mins X 1 totaling 12
 
 
Private Study 114
TOTAL HOURS 150

Assessment

EXAM Duration Timing
(Semester)
% of
final
mark
Resit/resubmission
opportunity
Penalty for late
submission
Notes
Assessment 2: Examination Assessment Type: Unseen examination, managed by SAS Duration: 2 hours Weighting: 70% Reassessment Opportunity: Yes Penalty for Late Submission: Standard UoL Penalty Appl  2 hours    70       
CONTINUOUS Duration Timing
(Semester)
% of
final
mark
Resit/resubmission
opportunity
Penalty for late
submission
Notes
Assessment 1: Coursework Assessment Type: Coursework Duration/Size: 10 weekly tests Weighting: 30% Reassessment Opportunity: Yes Penalty for Late Submission: No, any submissions received after so  10 weekly tests    30       

Aims

This course provides an introduction to derivative securities. Alternative derivative securities like forwards, futures, options, and exotic derivative contracts will be discussed. This incorporates detailing the properties of these securities.
Furthermore, a key aim is to outline how these assets are valued; as well as the use of derivatives in arbitrage, hedging and speculation. Finally, practical applications of derivatives and potential pitfalls are discussed.


Learning Outcomes

(LO1) Students will be able to demonstrate an understanding of the principles of option pricing.

(LO2) Students will be able to compare and contrast alternative fair valuation techniques for pricing derivative instruments.

(LO3) Students will be able to identify and explain biases in option pricing models.

(LO4) Students will be able to analyse and apply an appropriate pricing model to a variety of contingent claim securities.

(LO5) Students will be able to analyse and recognize the appropriate trading strategy to expected future market conditions.

(LO6) Students will be able to derive and apply evolving models of derivative options to effectively manage risk transfer and assess their behaviour in the face of volatile financial and economic conditions.

(S1) A problem solver

(S2) Numerate

(S3) Commercially Aware

(S4) IT Literate

(S5) Internationally Aware


Teaching and Learning Strategies

Teaching Method: Online Asynchronous Content
Unscheduled Directed Student Hours: 18
Attendance Recorded: No

Teaching Method : Synchronous Session
Description: 12 x 1 hour Session
Scheduled Directed Student Hours: 12
Attendance Recorded: Yes

Teaching Method: Seminar
Description: 6 x 1 hour sessions
Scheduled Directed Student Hours: 6
Attendance Recorded: Yes

Self-Directed Learning Hours: 114
Description: Students will engage in wider reading to support the module and its assessments.

Skills Mapping

Skill 1: Problem Solver
How is this Developed: Lectures, seminars and weekly quizzes.
Mode of assessment: Coursework and Examination

Skill 2: Numerate
How is this Developed: Lectures, seminars and weekly quizzes.
Mode of assessment: Coursework and Examination

Skill 3: Commercially Aware
How is this Developed: Lectures, seminars and weekly quizzes.
Mode of assessment: Coursework and Examination

Skill 4: IT Literate
How is this Developed: Lectures, seminars and weekly quizzes.
Mode of assessment: Coursework

Skill 5: Internationally Aware
How is this Developed: Lectures, seminars and weekly quizzes.
Mode of assessment: Coursework and Examination


Syllabus

 

• Introduction to the topic and the mechanisms of futures and options markets;
• Determination of the prices of forward and future contracts;
• Properties of stock options;
• Binomial option pricing mechanism;
• Black-Scholes Model and variants such as those for currencies, stock indices and futures;
• ‘Five Greek letters’ characteristics (risk), volatility smile and volatility term structure for equity and currency options;
• Derivative market / exchanges, securitization and trigger factors for financial crises;
• Value at risk and its estimation, weather, energy, insurance derivatives and derivative mishaps (and lesson to learn from those mistakes).


Recommended Texts

Reading lists are managed at readinglists.liverpool.ac.uk. Click here to access the reading lists for this module.