DERIVATIVES MARKETS - 2022/3

Module code: ECO3044

Module Overview

The module introduces the workings of financial and commodity derivatives markets and securities. Securities such as forwards, futures, swaps, CDOs and options have been traded on organised exchanges and/or ‘over the counter’, for decades. Financial markets are innovative and new derivative instruments are frequently introduced to facilitate risk-hedging or speculative investor operations. However, financial innovation can bring about its own significant risks, as the link between securitisation, CDOs and the credit crisis of 2007/08 showed. The emphasis of this module is on the pricing of derivative securities, their risks, as well as their use in professional settings, such as executive boards and derivative trading firms for hedging or investment purposes. 

Module provider

Economics

Module Leader

MANDILARAS Alexandros (Economics)

Number of Credits: 15

ECTS Credits: 7.5

Framework: FHEQ Level 6

JACs code: L100

Module cap (Maximum number of students): N/A

Overall student workload

Workshop Hours: 11

Independent Learning Hours: 84

Guided Learning: 22

Captured Content: 33

Module Availability

Semester 1

Prerequisites / Co-requisites

None

Module content

Indicative content includes:


  • Mechanics of futures markets

  • Hedging strategies using futures

  • Interest rates

  • Forward and futures prices

  • Securitisation, ABS, CDO and the credit crisis of 2007

  • Swaps

  • Mechanics of options markets

  • Properties of stock options

  • Trading strategies using options

  • Binomial trees of option pricing

  • Wiener Processes and the Black-Scholes model

  • The 'Greek' letters


Assessment pattern

Assessment type Unit of assessment Weighting
Online Scheduled Summative Class Test ASSESSMENT 1: MCQ TEST 10
Coursework ASSESSMENT 2: INDIVIDUAL REPORT 20
Project (Group/Individual/Dissertation) ASSESSMENT 3: GROUP PROJECT 30
Examination Online ASSESSMENT 4: FINAL EXAM 40

Alternative Assessment

Not applicable.

Assessment Strategy

The assessment strategy is designed to provide students with the opportunity to demonstrate that they have achieved the module’s learning outcomes and to: help develop students’ research and writing skills; strengthen their team-building skills; and engage them with modern technologies.

Thus, the summative assessment for this module consists of:


  • An in-semester Test normally held in week 3 (worth 10% of the final module mark); an Individual Report typically due in week 5 (15%); a Group Project (which includes a video presentation) ordinarily due in  week 10 (worth 35%); and a Final Examination (worth 40% of the final module mark).

  • The Test (10%) usually covers option, forward and futures contracts (including hedging and speculating).

  • The Individual Report (15%) is a 500-word max essay that requires students to assume the role of Chief Financial Officer and advise a company's Executive Board on decisions related to the use of futures/forward/options contracts.

  • The Group Project (35%) consists of a 2,000-word max report and a video presentation. It is based on a group's trading performance using the VolCube derivatives trading platform.

  • The Final Examination (40%) is designed to reflect the module's learning outcomes and enables students to display problem-solving skills and the ability to discern, apply, differentiate and analyse the material.



Formative assessment and feedback

Weekly self-tests with built-in feedback are available on SurreyLearn at the end of each week.

Module aims

  • Equip students with the factual, conceptual and procedural knowledge necessary to facilitate a deep understanding of financial and commodity derivatives markets and the securities traded on them.

Learning outcomes

Attributes Developed
001 Solve problems involving derivative securities under time-constraint KC
002 Research resources, use knowledge, analyse data and present arguments to write a professional report KCPT
003 Trade in options' contracts and options strategies in a simulated 'live' market KCPT
004 Work in groups to produce a joint report on group investment performance and present results using video technology KCPT
005 Present in-depth analysis of pricing procedures for derivative securities KC

Attributes Developed

C - Cognitive/analytical

K - Subject knowledge

T - Transferable skills

P - Professional/Practical skills

Methods of Teaching / Learning

The learning and teaching strategy is designed to satisfy the module’s learning outcomes.

The learning and teaching methods include:


  • 2-hour lecture per week × 11 weeks

  • Lecturer-Student interaction through the University’s VLE (SurreyLearn)

  • Q&As facilitated by electronic voting (PollEverywhere)


Indicated Lecture Hours (which may also include seminars, tutorials, workshops and other contact time) are approximate and may include in-class tests where one or more of these are an assessment on the module. In-class tests are scheduled/organised separately to taught content and will be published on to student personal timetables, where they apply to taken modules, as soon as they are finalised by central administration. This will usually be after the initial publication of the teaching timetable for the relevant semester.

Reading list

https://readinglists.surrey.ac.uk
Upon accessing the reading list, please search for the module using the module code: ECO3044

Programmes this module appears in

Programme Semester Classification Qualifying conditions
Economics and Finance BSc (Hons) 1 Compulsory A weighted aggregate mark of 40% is required to pass the module
Financial Mathematics BSc (Hons) 1 Compulsory A weighted aggregate mark of 40% is required to pass the module

Please note that the information detailed within this record is accurate at the time of publishing and may be subject to change. This record contains information for the most up to date version of the programme / module for the 2022/3 academic year.