BE351-7-SP-CO:
Derivative Securities
2023/24
Essex Business School
Colchester Campus
Spring
Postgraduate: Level 7
Current
Monday 15 January 2024
Friday 22 March 2024
20
26 October 2023
Requisites for this module
(none)
(none)
(none)
(none)
BE361
MRESN30012 Finance,
MSC N30012 Finance,
MSC N30024 Finance,
MSC N39012 Investment and Wealth Management,
MSC N39024 Investment and Wealth Management,
MSC N34212 Financial Engineering and Risk Management,
MSC N34224 Financial Engineering and Risk Management,
MSC N35112 Finance and Global Trading,
MPHDN30048 Finance,
MPHDN30084 Finance,
PHD N30048 Finance,
PHD N30084 Finance
This module focuses on the pricing of financial derivatives and their use for hedging financial risks. We start with the basics of two of the most important derivatives, futures and options. This is followed by an extensive analysis of the most widely used option pricing models, the Black-Scholes model and the binomial model and various numerical techniques for pricing financial derivatives.
Futures and options are then utilised in the context of hedging financial risks. By relaxing the rigid assumptions underlying the Black-Scholes formula, alternative option pricing models are presented. Students will be provided with computer exercises that will illustrate the practical implementation of the models introduced in the module.
The aim of this module is:
- To provide students with an understanding of the pricing of financial derivatives and their use in hedging financial risks.
By the end of this module, students will be expected to be able to:
- Understand the main types of derivatives and how they can be used to hedge risks.
- Devise trading strategies and arbitrage strategies with derivative securities.
- Understand the main concepts and methodologies underlying financial option pricing.
- Understand extensions to the Black and Scholes option pricing model.
Critical Thinking:
By studying the way derivatives work and the theoretical foundations of some widely employed pricing models students will be able to understand the assumptions used by these models and critically analyse them. This will allow students to appreciate the usefulness/weakness of these models, and understand why sometimes they work/fail in practice. This type of knowledge is particularly useful in areas such as investment banking and asset management.
This module will be delivered via:
- One lecture per week.
- One class per week.
There are also computer labs to consolidate and apply the knowledge obtained.
Lecture notes will be uploaded to Moodle. Students are expected to read the relevant material and prepare ahead of the lectures.
It is also strongly recommended that students read the additional material to supplement the lectures.
Students should be aware that this module relies heavily on quantitative methods.
The above list is indicative of the essential reading for the course.
The library makes provision for all reading list items, with digital provision where possible, and these resources are shared between students.
Further reading can be obtained from this module's
reading list.
Assessment items, weightings and deadlines
| Coursework / exam |
Description |
Deadline |
Coursework weighting |
| Coursework |
Online Test |
|
100% |
| Exam |
Main exam: In-Person, Open Book, 120 minutes during Summer (Main Period)
|
| Exam |
Reassessment Main exam: In-Person, Open Book, 120 minutes during September (Reassessment Period)
|
Exam format definitions
- Remote, open book: Your exam will take place remotely via an online learning platform. You may refer to any physical or electronic materials during the exam.
- In-person, open book: Your exam will take place on campus under invigilation. You may refer to any physical materials such as paper study notes or a textbook during the exam. Electronic devices may not be used in the exam.
- In-person, open book (restricted): The exam will take place on campus under invigilation. You may refer only to specific physical materials such as a named textbook during the exam. Permitted materials will be specified by your department. Electronic devices may not be used in the exam.
- In-person, closed book: The exam will take place on campus under invigilation. You may not refer to any physical materials or electronic devices during the exam. There may be times when a paper dictionary,
for example, may be permitted in an otherwise closed book exam. Any exceptions will be specified by your department.
Your department will provide further guidance before your exams.
Overall assessment
Reassessment
Module supervisor and teaching staff
Dr Luiz Vitiello, email: lrviti@essex.ac.uk.
Dr Luiz Vitiello and Dr Lazaros Symeonidis
E: ebspgtad@essex.ac.uk
Yes
No
Yes
Dr Aris Kartsaklas
Brunel University London
Senior Lecturer
Available via Moodle
Of 33 hours, 30 (90.9%) hours available to students:
0 hours not recorded due to service coverage or fault;
3 hours not recorded due to opt-out by lecturer(s), module, or event type.
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