Module
Futures and Options
Module description
Summary:
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, students acquire confidence and basic skills necessary for working in finance industry worldwide.
Full module specification
| Module title: | Futures and Options |
|---|---|
| Module code: | BEE3032 |
| Module level: | 3 |
| Academic year: | 2023/4 |
| Module lecturers: |
|
| Module credit: | 15 |
| ECTS value: | 7.5 |
| Pre-requisites: | BEE1029 or BEE1030 or (BEE1036 and BEE1037) or BEE2024 or (BEE2038 and BEE2039) |
| Co-requisites: | None |
| Duration of module: |
Duration (weeks) - term 1: 0 Duration (weeks) - term 2:11 Duration (weeks) - term 3:0 |
Module aims
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.
ILO: Module-specific skills
- 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
- 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
- 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
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 |
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 | August examination period |
| Final exam | Examination (90%) (2 hours) | 1-9 | August examination period |
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
Indicative learning resources - Basic reading
Basic reading:
Hull, J. (2014), The Fundamentals of Futures and Options Markets, 8th edition, Pearson
Module has an active ELE page?
Yes
Origin date
01/07/2012
Last revision date
13/03/2023