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 ACFI310
Coordinator Dr X Fu
Finance and Accounting
Xi.Fu@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):

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 12

6

      12

6

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

Assessment

EXAM Duration Timing
(Semester)
% of
final
mark
Resit/resubmission
opportunity
Penalty for late
submission
Notes
Assessment 2: Written Examination Assessment Type: Written Exam Duration: 24 hours Weighting: 90% Reassessment Opportunity: Yes Penalty for Late Submission: Standard UoL Penalty Applies   24 hours    90       
CONTINUOUS Duration Timing
(Semester)
% of
final
mark
Resit/resubmission
opportunity
Penalty for late
submission
Notes
Assessment 1: Online Quiz Assessment Type: Practical Assessment Duration: 1 hour Weighting: 10% Reassessment Opportunity: No reassessment opportunity; the reason is detailed below - The final   1 hour    10       

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.   Also the course demonstrates the use of derivatives in arbitrage, hedging and speculation. Finally, practical applications of derivatives and potential pitfalls are discussed.

The class is run as a discussion based forum and students are expected to read all necessary materials prior to each session.


Learning Outcomes

(LO1) Students will be able to describe 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 explain the biases in option pricing models.

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

(LO5) Students will be able to recognize the trading strategy appropriate 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) Adaptability

(S2) Problem solving skills

(S3) Numeracy

(S4) Commercial awareness

(S5) Teamwork

(S6) Organisational skills

(S7) Communication skills

(S8) IT skills

(S9) International awareness

(S10) Lifelong learning skills

(S11) Ethical awareness


Teaching and Learning Strategies

Teaching Method: Online Asynchronous Learning Materials
Unscheduled Directed Student Hours: 12
Attendance Recorded: No

Teaching Method: Synchronous Lecture
Scheduled Directed Student Hours: 12
Attendance Recorded: No

Teaching Method: Seminar
Scheduled Directed Student Hours: 6
Attendance Recorded: Yes

Teaching Method: Group Study
Scheduled Student Hours: 6
Attendance Recorded: No

Self-Directed Learning Hours: 114

Costs Information:
There are no specific costs attached to this modules as the textbooks will be available through the electronic versions offered by the library.

Skills/Other Attributes Mapping

Skills / attributes: Lifelong learning skills
How this is developed: Taught/Lectures Workshop/Clinic
Mode of assessment (if applicable): Examination

Skills / attributes: International awareness
How this is developed: Taught/Lectures Workshop/Clinic
Mode of assessment (if applicab le): Examination

Skills / attributes: IT skills
How this is developed: Taught/Lectures Workshop/Clinic
Mode of assessment (if applicable)

Skills / attributes: Communication skills
How this is developed: Taught/Lectures Workshop/Clinic
Mode of assessment (if applicable)

Skills / attributes: Organisational skills
How this is developed: Taught/Lectures Workshop/Clinic
Mode of assessment (if applicable): Examination

Skills / attributes: Teamwork
How this is developed: Taught/Lectures Workshop/Clinic
Mode of assessment (if applicable)

Skills / attributes: Commercial awareness
How this is developed: Taught/Lectures
Mode of assessment (if applicable): Examination

Skills / attributes: Numeracy
How this is developed: Taught/Lectures Workshop/Clinic
Mode of assessment (if applicable): Examination

Skills / attributes: Problem solving skills
How this is developed: Taught/Lectures Workshop/Clinic
Mode of assessment (if applicable): Examination

Skills / attributes: Adaptability
How this is developed: Taught/Lectures Workshop/Clinic
Mode of assessment (if applicable): Examination


Syllabus

 

Introduction to the topic and a brief idea about the mechanism of the futures and options market;

Determination of the prices of forward and future contracts;

Properties of stock options;

All about the binomial option pricing mechanism;

Introduction to the classic Black – Scholes Model and its different variants like the one on currencies, stock indices and futures;

Introduction to five Greek letters, volatility smile and volatility term structure for equity and currency options;

Introduction to derivative market / exchanges, securitization and the trigger factors for the recent financial crisis;

Introduction to 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.