Units
Financial Derivatives
Unit code: EFB309
Contact hours: 3 per week
Credit points: 12
Information about fees and unit costs
This unit extends students' knowledge of financial derivatives as obtained in Finance 2. Topics include: advanced option pricing models; advanced option trading strategies; exotic options; forward and futures pricing models; hedging commodities and equities by using futures; forward rate agreement and interest rate swaps; financial risk management issues.
Availability
| Semester | Available |
|---|---|
| 2013 Semester 1 | Yes |
Sample subject outline - Semester 1 2013
Note: Subject outlines often change before the semester begins. Below is a sample outline.
Rationale
This unit provides students with an in depth analysis of derivatives securities. This unit will examine the theoretical underpinnings of numerous derivative pricing models. Students will also gain exposure to the manner in which various derivative securities are used in a practical sense, for hedging and speculative purposes. The subject builds on the basic knowledge of financial derivative instruments, acquired in Finance 2.
Aims
The aim of this unit is for students to develop an advanced level of skills in relation to the theory behind, and application of derivative instruments.
Objectives
Course Learning Goals (Undergraduate)
The QUT Business School has established the Assurance of Learning (AOL) Goals to meet contemporary industry needs and standards. Achieving these learning outcomes will assist you to meet the desired graduate outcomes set at QUT - aligned with other internationally renowned business schools. Students will develop the following capabilities relevant to a contemporary global and sustainable business environment:
Have knowledge and skills pertinent to a particular discipline (KS)
1.1 Integrate and apply disciplinary theory and skills to practical situations
1.2 Incorporate the use of technology appropriate to the discipline and context
Be critical thinkers and effective problem solvers (CTA)
2.1 Identify, research and critically analyse information relevant to a business problem or issue, be able to synthesise that information in order to evaluate potential solutions, make recommendations or otherwise effectively address the problem or issue
Be professional communicators in an intercultural context (PC)
3.1 Communicate effectively through written tasks appropriate to varied contexts and audiences
3.2 Communicate effectively through professional oral presentations appropriate to varied contexts and audiences
Be able to work effectively in a Team Environment (TW)
4.1 Demonstrate effective team skills in order to contribute appropriately to the production of a group output
Have a Social and Ethical Understanding (SEU)
5.1 Apply ethical reasoning, standards or codes of practice relevant to the discipline and make decisions that are informed by social and cultural understanding
Unit Objectives
Upon completion of this unit, students will be able to:
1. Articulate the principles of derivative pricing models.
2. Apply a wide range of derivatives to managing financial risk and speculating on asset prices.
3. Critically analyse the major issues related to the use of derivatives in terms of their risks and how they may be misused.
The specific course learning goals and unit objectives that apply to this unit are shown in the assessment section of this unit outline.
Content
This unit covers:
1. Principles of option pricing
2. Binomial Model
3. Black-Scholes Model
4. Option sensitivities, exotic options
5. Option strategies: basic and advanced
6. Forward and futures
7. Use of futures: hedging
8. Interest rate derivatives
9. Swaps
10. Control of derivatives operations
Approaches to Teaching and Learning
Lectures and Tutorials are designed to be an interactive forum, where students develop strong communication and reasoning skills as well as quantitative analysis skills.
In accordance with QUT policy, all units are to be subject to Criterion Referenced Assessment (CRA). The unit coordinator will provide students with further details regarding CRA during the course of the semester during class and on the unit's Blackboard site.
Assessment
The assessment in this unit aims to support your achievement of the learning objectives for both Discipline Knowledge and Other Graduate Capabilities. Assessment has been designed in order to allow you to:
In accordance with QUT policy, all units are to be subject to Criterion Referenced Assessment (CRA). The Unit Coordinator will provide students with further details regarding CRA during the course of the semester during class and on the unit's Blackboard site.Students will receive feedback in various forms throughout the semester which may include:
Assessment name:
Mid-Semester Examination
Description:
Short answer questions and mathematical problems. This component of the assessment is both summative and formative with detailed feedback given to students. It will cover Topics 1 to 5. The mid semester exam is designed to be approximately in the middle of the semester, so that a good spread of assessment with the final exam is achieved. This exam will involve an application of issues covered in lectures and tutorials. It will test the students' knowledge of derivative trading as outlined in the objectives of the unit. With calculation questions, students will be assessed relative to a set benchmark. In written answer questions, students will need to show an in-depth understanding of the issues involved.
Length/Duration: 60 minutes with 10 minutes perusal
Formative or Summative: Summative and Formative
Relates to objectives:
Unit objectives: 1, 2 and AOL goals: KS (1.1), CTA (2.1)
Weight:
30%
Internal or external:
Internal
Group or individual:
Individual
Due date:
Week 7
Assessment name:
Project
Description:
Group project involving an application of option pricing. This component of the assessment is formative with feedback given to students. This assessment covers Topics 1 to 6. The project will involve an in-depth application of topics covered in the course with a practical emphasis. Students will be assessed on the depth of knowledge shown and level of research undertaken.
Length/Duration: 2,000 words
Formative or Summative: Formative
Relates to objectives:
Unit objectives: 1, 2 and AOL goals: KS (1.1), (1.2), CTA (2.1), PC (3.1), TW (4.1)
Weight:
20%
Internal or external:
Internal
Group or individual:
Group
Due date:
Week 12
Assessment name:
End of Semester Examination
Description:
Short answer questions and mathematical problems. This component of the assessment is summative. This examination will cover Topics 7 to 11. The final examination will be held in the central exam period, so that a good spread of assessment with the mid-semester exam is achieved. This exam will involve an application of issues covered in lectures and tutorials. It will test the students' knowledge of derivative pricing and trading as outlined in the objectives of the unit. With calculation questions, students will be assessed relative to a set benchmark. In written answer questions, students will need to show an in-depth understanding of the issues involved.
Formative or Summative: Summative
Relates to objectives:
Unit objectives: 1, 2, 3l and AOL goals: KS (1.1), CTA (2.1)
Weight:
50%
Internal or external:
Internal
Group or individual:
Individual
Due date:
Central Exam Period
Academic Honesty
QUT is committed to maintaining high academic standards to protect the value of its qualifications. To assist you in assuring the academic integrity of your assessment you are encouraged to make use of the support materials and services available to help you consider and check your assessment items. Important information about the university's approach to academic integrity of assessment is on your unit Blackboard site.
A breach of academic integrity is regarded as Student Misconduct and can lead to the imposition of penalties.
Resource materials
Prescribed Text
Chance, D. and Brooks, R., An Introduction to Derivatives and Risk Management, South-Western, 8th edition, 2010
Additional Resources
The following are useful references:
Risk assessment statement
There are no out-of-the-ordinary risks associated with lectures or tutorials in this unit. You should, however, familiarise yourself with evacuation procedures operating in the buildings in which you attend classes and take the time to
view the Emergency video.
Disclaimer - Offer of some units is subject to viability, and information in these Unit Outlines is subject to change prior to commencement of semester.
Last modified: 20-Nov-2012
