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 Derivatives
Code ACFI918
Coordinator Mr JP Laws
Finance and Accounting
J.Laws@liverpool.ac.uk
Year CATS Level Semester CATS Value
Session 2021-22 Level 7 FHEQ Second Semester 15

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

 

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 12
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
Examination. There is a resit opportunity. Standard UoL penalty applies for late submission. This is an anonymous assessment.  24 hours    80       
CONTINUOUS Duration Timing
(Semester)
% of
final
mark
Resit/resubmission
opportunity
Penalty for late
submission
Notes
Individual assignment. There is a resit opportunity. Standard UoL penalty applies for late submission. This is an anonymous assessment.  -1000 words    20       

Aims

To provide an introduction to derivative products, namely futures and options in their many different varieties;

To examine these products from both a speculative and hedging perspective and also consider advanced strategies such as intra and inter commodity spreads for futures as well as sophisticated option strategies used, not exclusively, to trade volatility;

To examine the sensitivities of option strategies to underlying factors, namely an options "Greeks";

To consider the Black-Scholes-Merton and the Binomial approaches to option pricing;

To use Monte-Carlo simulation for the pricing of path dependent exotic options;

To develop skills in use of Excel, VBA, and Matlab.


Learning Outcomes

(LO1) Understand how futures and options are traded and priced.

(LO2) Be able to select the appropriate product to either hedge or speculate against future expected market conditions.

(LO3) Apply pricing strategies in market based situations.

(LO4) Develop trading skills using market data.

(S1) IT skills. Students will develop IT skills through data manipulation and analysis, charting in Excel, writing VBA code, 3d plots.

(S2) Problem solving. Students will develop problem solving skills during practical class sessions.

(S3) Numeracy. Students will develop numeracy skills through research problem sets.


Teaching and Learning Strategies

Hybrid delivery, with social distancing on campus.

1 hour online asynchronous learning per week x 12 weeks
1 hour face-to-face synchronous lecture per week x 12 weeks
1 hour face-to-face seminar every other week x 6 weeks
1 hour face-to-face peer-to-peer learning every other week (unscheduled) x 6 weeks
Self-directed learning x 114 hours


Syllabus

 

Introduction to Derivatives:

The use of futures in hedging and speculation;

The use of options in hedging and speculation;

Pricing options using the binomial approach;

Pricing options using the Black-Scholes-Merton model;

Characteristics of exotic options;

Pricing Exotic options using the binomial Approach and monte-Carlo simulation;

Estimating and measure volatility;

Forecasting volatility using ARCH and GARCH models.


Recommended Texts

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