Futures and Options
| Module title | Futures and Options |
|---|---|
| Module code | BEE3032 |
| Academic year | 2024/5 |
| Credits | 15 |
| Module staff | Dr Julian Neira Sanchez (Convenor) |
| Duration: Term | 1 | 2 | 3 |
|---|---|---|---|
| Duration: Weeks | 11 |
| Number students taking module (anticipated) | 40 |
|---|
Module description
This module will cover the basic properties, pricing and hedging of futures/forwards, options, swaps and other derivatives traded on financial markets, together with the working mechanism of the derivative markets. The module provides analytical and numerical methods to price derivatives contracts. The module covers the use of derivatives in hedging and managing financial risk but also their limitations in connection with stock market crashes and 2007 financial crises.
Additional Information:
Internationalisation
This module covers a wide range of topics providing necessary tools and knowledge applicable to international financial markets.
Employability
In this module, you will acquire confidence and basic skills necessary for working in finance industry worldwide.
Module aims - intentions of the module
The aim of the module is to provide an in-depth study of the use of futures and options with particular reference to the risk management and hedging. Both from a theoretical and empirical perspective the module will also cover in detail why futures and options are used, the mechanics of using futures and options, the economic benefits of using futures and options as risk management instruments and the pricing of futures and option contracts. The material covered here will be relevant to understand and critically evaluate the use of futures and options in different markets.
Intended Learning Outcomes (ILOs)
ILO: Module-specific skills
On successfully completing the module you will be able to...
- 1. explain the role of derivatives markets and alternative derivative contracts for managing risk;
- 2. be familiar with the pricing of futures and options contracts;
- 3. appreciate the use of hedging strategies with futures and options.
ILO: Discipline-specific skills
On successfully completing the module you will be able to...
- 4. critically evaluate the application of economic theories to the use of futures and options;
- 5. explain the role and use of futures and options as risk management instruments;
- 6. explain the role of hedging strategies as a means of managing risk;
- 7. explain and apply the principles of pricing option contracts.
ILO: Personal and key skills
On successfully completing the module you will be able to...
- 8. develop the ability to analyse a wide range of commodity and financial market issues arising with the use of futures and options in the context of risk management;
- 9. be able to interpret the use of statistical techniques in testing economic theory, and to discuss economic issues associated with the use of risk management instruments.
Syllabus plan
Topics covered:
- Mechanics of Futures Markets
- Determination of Forward and Future Prices
- Hedging Strategies Using Futures
- Interest Rates
- Mechanics of Options Markets
- Trading Strategies Involving Options
- Binomial Trees
- The Black-Scholes formula
- The Greek Letters
- Volatility Smiles
Learning activities and teaching methods (given in hours of study time)
| Scheduled Learning and Teaching Activities | Guided independent study | Placement / study abroad |
|---|---|---|
| 30 | 120 | 0 |
Details of learning activities and teaching methods
| Category | Hours of study time | Description |
|---|---|---|
| Schedules learning and teaching | 20 | Lectures |
| Scheduled Learning and Teaching Activities | 10 | Tutorials |
| Guided independent study | 120 | Private study |
Formative assessment
| Form of assessment | Size of the assessment (eg length / duration) | ILOs assessed | Feedback method |
|---|---|---|---|
| Exercises | 2 hours each | 1-9 | Written or oral feedback |
Summative assessment (% of credit)
| Coursework | Written exams | Practical exams |
|---|---|---|
| 10 | 90 | 0 |
Details of summative assessment
| Form of assessment | % of credit | Size of the assessment (eg length / duration) | ILOs assessed | Feedback method |
|---|---|---|---|---|
| Online quizzes | 10 | 10 minutes | 1-9 | On ELE and oral |
| Final Exam | 90 | 2 hours | 1-9 | Written |
Details of re-assessment (where required by referral or deferral)
| Original form of assessment | Form of re-assessment | ILOs re-assessed | Timescale for re-assessment |
|---|---|---|---|
| Online quizzes | Single online quiz (10%) | 1-9 | Referral/deferral period |
| Final exam | Examination (90%) (2 hours) | 1-9 | Referral/deferral period |
Re-assessment notes
Deferral – if you have been deferred for any assessment you will be expected to submit the relevant assessment. The mark given for a re-assessment taken as a result of deferral will not be capped and will be treated as it would be if it were your first attempt at the assessment.
Referral – if you have failed the module overall (i.e. a final overall module mark of less than 40%) you will be expected to submit the relevant assessment. The mark given for a re-assessment taken as a result of referral will be capped at 40%.
Indicative learning resources - Basic reading
Basic reading:
- Hull, J. (2014), The Fundamentals of Futures and Options Markets , 8th edition, Pearson
| Credit value | 15 |
|---|---|
| Module ECTS | 7.5 |
| Module pre-requisites | BEE1029 or (BEE1036 and BEE1037) or BEE2025 or (BEE2038 and BEE2039) |
| Module co-requisites | None |
| NQF level (module) | 6 |
| Available as distance learning? | No |
| Origin date | 01/07/2012 |
| Last revision date | 21/01/2024 |
