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ES32080: Financial derivatives

[Page last updated: 22 April 2025]

Academic Year: 2025/26
Owning Department/School: Department of Economics
Credits: 5 [equivalent to 10 CATS credits]
Notional Study Hours: 100
Level: Honours (FHEQ level 6)
Period:
Semester 2
Assessment Summary: EXCB 100%
Assessment Detail:
  • Examination (EXCB 100%)
Supplementary Assessment:
Like-for-like reassessment (where allowed by programme regulations)
Requisites: Before taking this module you must take ES22014 OR take ES20012 OR ( take ES20070 AND take ES20011 )
In taking this module you cannot take ES32079
Learning Outcomes: At the end of this course, students should be able to: structure and construct portfolios including a variety of financial instruments; apply principles of arbitrage, hedging and risk management; apply and evaluate pricing theories, and construct valuations based on analysis from different models.


Synopsis: You will gain an understanding of how financial markets for derivatives work. You will learn how to conduct a technical analysis of pricing financial derivatives. You will get analytical insights on different trading strategies using financial derivatives and related financial assets.

Content: Introduction to derivatives, including futures and forward contracts, call and put options. Valuation of futures and forwards contracts. Time value of money, interest rates, bonds. Option pricing; put-call parity, trading strategies, arbitrage. Random asset price modelling. Introduction to stochastic calculus. Analysis for pricing derivatives, including options. Other topics to be chosen from: interest rate swaps and their valuation, assets paying dividends, the binomial pricing model, risk management of options (delta, theta and gamma).

Skills: Written communication, Numeracy, Time management and Organisational skills, Data acquisition, handling and analysis, Problem solving, Working independently, Critical/analytical skills, Precise thinking, Accuracy and attention to detail.

Aims: To provide an introduction to derivative securities including futures and options, their valuation and management.

Course availability:

ES32080 is Optional on the following courses:

Department of Economics
  • UHES-AFB10 : BSc(Hons) Economics (Year 3)
  • UHES-AAB03 : BSc(Hons) Economics with Study year abroad (Year 4)
  • UHES-AKB03 : BSc(Hons) Economics with Year long work placement (Year 4)
  • UHES-AFB12 : BSc(Hons) Economics and Mathematics (Year 3)
  • UHES-AAB04 : BSc(Hons) Economics and Mathematics with Study year abroad (Year 4)
  • UHES-AKB04 : BSc(Hons) Economics and Mathematics with Year long work placement (Year 4)
  • UHES-ACB04 : BSc(Hons) Economics and Mathematics with Combined Placement and Study Abroad (Year 4)
  • UHES-AAB01 : BSc(Hons) Economics and Politics with Study year abroad (Year 4)
  • UHES-AKB01 : BSc(Hons) Economics and Politics with Year long work placement (Year 4)
  • UHES-ACB01 : BSc(Hons) Economics and Politics with Combined Placement and Study Abroad (Year 4)
  • UHES-ACB03 : BSc(Hons) Economics with Combined Placement and Study Abroad (Year 4)
  • UHES-AFB11 : BSc(Hons) Economics with Politics (Year 3)

Notes:

  • This unit catalogue is applicable for the 2025/26 academic year only. Students continuing their studies into 2026/27 and beyond should not assume that this unit will be available in future years in the format displayed here for 2025/26.
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