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Futures and Options

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:



This module covers a wide range of topics providing necessary tools and knowledge applicable to international financial markets.



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:
  • Dr Julian Neira Sanchez - Convenor
Module credit:15
ECTS value:



BEE1029 or BEE1030 or (BEE1036 and BEE1037) or BEE2024 or (BEE2038 and BEE2039)



Duration of module: Duration (weeks) - term 1:


Duration (weeks) - term 2:


Duration (weeks) - term 3:


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 ActivitiesGuided independent studyPlacement / study abroad

Details of learning activities and teaching methods

CategoryHours of study timeDescription
Schedules learning and teaching20Lectures
Scheduled Learning and Teaching Activities10Tutorials
Guided independent study120

Formative assessment

Form of assessmentSize of the assessment (eg length / duration)ILOs assessedFeedback method
Exercises2 hours each1-9Written or oral feedback

Summative assessment (% of credit)

CourseworkWritten examsPractical exams

Details of summative assessment

Form of assessment% of creditSize of the assessment (eg length / duration)ILOs assessedFeedback method
Online quizzes1010 minutes1-9On ELE and oral
Final Exam902 hours1-9Written

Details of re-assessment (where required by referral or deferral)

Original form of assessmentForm of re-assessmentILOs re-assessedTimescale for re-assessment
Online quizzesSingle online quiz (10%)1-9August examination period
Final examExamination (90%) (2 hours)1-9August 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

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Last revision date