
- UCAS course code
- NT11
- UCAS institution code
- M20
BA Modern Language and Business & Management (Chinese) / Course details
Year of entry: 2024
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Course unit details:
Financial Derivatives
Unit code | BMAN30091 |
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Credit rating | 10 |
Unit level | Level 3 |
Teaching period(s) | Semester 1 |
Available as a free choice unit? | No |
Overview
Successful completion of this course and BMAN 30242 provides the basic analytical foundations for students wishing to pursue a career in financial markets and investment banking that require knowledge of currency, equity and interest rate risk management, corporate treasury management and derivatives trading. The companion course to this one, BMAN 30242 has as its major focus interest rate derivative instruments, including forward rate arrangements (FRAs) and interest rate swaps.
Pre/co-requisites
Unit title | Unit code | Requirement type | Description |
---|---|---|---|
Foundations of Finance A | BMAN23000 | Pre-Requisite | Compulsory |
Foundations of Finance B | BMAN23000B | Pre-Requisite | Compulsory |
Introduction to Corporate Finance and Financial Instruments | BMAN20242 | Pre-Requisite | Compulsory |
Foundations of Finance C | BMAN23000C | Pre-Requisite | Compulsory |
Core/Compulsory/Optional/ Free Choice: Option
Pre-requisite units: A 40% pass mark for BMAN23000 or BMAN20242 (although a pass mark of 50% or higher is preferable). STUDENTS INTERESTED IN ENROLLING IN BMAN 30091 SHOULD HAVE STRONG QUANTITATIVE SKILLS AND SHOULD NOT BE INTIMIDATED BY COMPLICATED EQUATIONS.
Programmes to which this course unit contributes (including cross faculty/school): Open to all programmes provided pre-reqs are met including IPO and exchange. Option: Accounting, Mgt, IM, IBFE, Act Sci & Maths, BA Econ.
Aims
The course aims to describe, analyse, and evaluate the characteristics of some of the most important financial derivative instruments, namely forwards, futures, and options. The fourth building block of modern financial engineering, financial swaps are covered extensively in BMAN 30242 in the second semester. This course equips students with some essential techniques to be applied when valuing these financial derivatives and hedging the associated financial market risk exposures. In particular, it emphasizes the general principles central to derivatives valuation including no-arbitrage arguments and risk-neutral valuation methods, together with their implications for the pricing of the selected classes of financial derivatives. The course also analyses the asset price dynamics that are important in deriving both the binomial and Black-Scholes option pricing models and pricing other more complex derivative instruments.
Teaching and learning methods
Overall there will be 20 hours (10x2) of formal lectures + 6 hours (6x1) of workshop style tutorials.
• Lectures: 2 hours per week over 10 weeks
The lectures will be on campus and a podcast of the lecture will be made available on Blackboard.
• Tutorials/Workshops: 1 hours per week over 6 weeks
The workshops run in weeks 3, 4, 5, 8, 9, and 10. At the end of each workshop week the solutions to the relevant exercise pack will be made available via Blackboard.
Practice tests will also be made available on Canvas on a regular basis (via Mobius)
Knowledge and understanding
- be familiar with the characteristics of the relevant financial derivative instruments and factors affecting their prices
- understand how financial derivatives are valued based on no-arbitrage pricing arguments and risk-neutral valuation methods
- understand how the instruments covered can be used to implement basic market risk management strategies, appropriate for corporate applications
- be able to solve basic problems requiring the ability to price derivative instruments and hedge market risk based on numerical data and current market conventions
- have acquired the basic skills required for pricing financial derivatives, including familiarity with some central techniques, namely risk-neutral valuation, no-arbitrage pricing, the binomial model, and the Black-Scholes model.
- be able to exercise quantitative and numerical skills in pricing derivative instruments.
- understand the Greeks and use these for hedging purposes
- discuss and calculate implied volatility
- be familiar with the volatility smile/term structure/surface and implied distributions and explain why these are observed in practice
Intellectual skills
- be able to exercise a capacity for independent and self-managed learning
Practical skills
- be able to exercise a capacity for independent and self-managed learning
Transferable skills and personal qualities
- be able to exercise a capacity for independent and self-managed learning
Assessment methods
Formative Assessment: Weekly practice tests (Mobius)
Summative Assessment: Exam (100%)
Feedback methods
- Feedback on formative assessment: Immediately via Mobius
- Feedback on summative assessment: Generic feedback released on Canvas after marks are announced
Recommended reading
The recommended text for the course is Hull J.C. (2018), Options, Futures and Other Derivatives: Global edition, 11/E, ISBN-10: 1292410655, ISBN-13: 978-1292410654, Pearson Higher Education.
You must make sure you have access to a copy of the core text. It is a very useful text for students intending to take BMAN 30242 in the second semester. The website linked to the Hull text is: http://www-2.rotman.utoronto.ca /~hull/. An online version is available at https://read.kortext.com/reader/pdf/953506/ where you can access using your university email address, and login via institutional account.
Study hours
Scheduled activity hours | |
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Assessment written exam | 2 |
eAssessment | 1 |
Lectures | 20 |
Practical classes & workshops | 6 |
Independent study hours | |
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Independent study | 71 |
Teaching staff
Staff member | Role |
---|---|
Ser-Huang Poon | Unit coordinator |
Eirini Konstantinidi | Unit coordinator |
Additional notes
Co-requisites: None
Dependent course units: None
Programme Restrictions: There are no programme restrictions for this course providing the pre-requisites listed above are met.
For Academic Year: 20245/26
Updated: March 2025