Financial Markets, Securities And Derivatives ECON5009
- Academic Session: 2020-21
- School: Adam Smith Business School
- Credits: 20
- Level: Level 5 (SCQF level 11)
- Typically Offered: Semester 1
- Available to Visiting Students: No
- Available to Erasmus Students: No
This course provides a broad overview of the financial markets with different types of derivatives and securities. The emphasis is on the practical use of derivatives, involving the analysis of different methods of pricing and hedging. The lectures introduce the basic models for option pricing and hedging, computation of option Greeks, pricing of forward, futures and interest rates-based financial instruments. The computer lab sessions provide an opportunity for the students to implement the theoretical concepts and test their effectiveness in practice.
The course will be delivered in a blended format consisting of online (both asynchronous and synchronous) and some face to face elements, including theoretical and practical elements as well as labs. The course will consist of 5 main units.
Coursework: computer project (33% of final grade for course)
Presentation of project results (17% of final grade for course)
Discussion of peer group's result (17% of final grade for course)
Examination: 24 hour open book-take home exam (33%)
Main Assessment In: December
This course focuses on providing a broad overview of the financial markets with emphasis on pricing and hedging of different securities and derivatives. The issues related to trading of different financial instruments are discussed in detail and the option pricing methodology is taught using the basic market models such as the binomial model and Black-Scholes model. The course also teaches the construction of investment portfolios using interest rates-based instruments such as bonds and credit default swaps. The hedging techniques involving the computation of option Greeks are also covered. The practical implementation of many of the theoretical concepts is taught in the computer lab sessions using the Monte Carlo method.
Intended Learning Outcomes of Course
By the end of this course, students will be able to:
1. analyse the effectiveness of different models used in the financial markets;
2. calculate the price and hedging portfolios of popular derivatives traded in the financial markets;
3. formulate investment portfolios using interest-rates based financial instruments.
Minimum Requirement for Award of Credits
Students must submit at least 75% by weight of the components (including examinations) of the course's summative assessment.