DERIVATIVES SECURITIES - 2017/8

Module code: MANM137

Module provider

Surrey Business School

Module Leader

WOJAKOWSKI RM Dr (SBS)

Number of Credits

15

ECT Credits

7.5

Framework

FHEQ Level 7

JACs code

N300

Module cap (Maximum number of students)

N/A

Module Availability

Semester 2

Overall student workload

Independent Study Hours: 117

Lecture Hours: 44

Assessment pattern

Assessment type Unit of assessment Weighting
School-timetabled exam/test TEST - 1 HOUR - CLOSED BOOK 30%
Examination EXAM - 2 HOUR - CLOSED BOOK 70%

Alternative Assessment

Same assessment as above where exam and coursework are replaced by equivalent resit exams or tests.

Prerequisites / Co-requisites

MANM097 (Foundations of Finance) is a pre-requisite for this module

Module overview

This module is targeted at students interested in understanding the pricing of derivative securities, specifically options. Applications are used to reinforce a rigorous development of arbitrage theory that underpins the pricing of derivative securities.

Module aims

To provide a profound understanding of derivative securities including forwards, futures and options.

Provide the technical appreciation of the strengths and weakness of derivative pricing models.

Sensitise the student to the quantitative nature of derivative markets.

Learning outcomes

Attributes Developed
Explain pure arbitrage theories and relate them to the pricing of all types of derivative securities including forwards, futures and options. KC
Introduce various types of derivative securities and discuss the role each financial security can play in achieving financial objectives. KCT
Be able to apply the binomial and continuous time pricing theory based on pure arbitrage KCT
Be able to apply sophisticated numerical techniques to price derivative securities to achieve financial objectives KCPT

Attributes Developed

C - Cognitive/analytical

K - Subject knowledge

T - Transferable skills

P - Professional/Practical skills

Module content

Indicative content includes:


Pricing Forward and Futures contracts
Introduction to options contracts
Discrete time finance: Pricing European options using binomial trees
Pricing options on stock indices and currencies using binomial trees
Pricing American options and other path-dependent derivatives on binomial trees
Introduction to continuous time finance: The Black-Scholes Model as the limiting case of the binomial model  
Monte-Carlo pricing techniques
Option pricing via numerical solutions of Partial Differential Equations

Methods of Teaching / Learning

The learning and teaching strategy is designed to allow students to come to grips with the essential quantitative nature of the subject, and importantly, to facilitate the application of theory to pricing problems.

The learning and teaching methods include:


Formal lectures to impart theory
Tutorials (Demonstration Sessions and Workshops) to solve practical exercises to reinforce and test learning and to facilitate application of theory
Use of e-Learning to facilitate teaching, enhance the learning outcomes and direct students to information sources and to the relevant reading in the set textbooks and in journal articles.
Independent Learning to read the corresponding textbook chapters, research papers and web based articles and become familiar with lecture slides and solve exercises before attending lectures and tutorials, as well as complementing these after the material has been summarised whenever understanding curriculum requires more readings and solving exercises.
Total student learning time 154 hours, including one 2-hour lecture per week x 11 weeks, one 1-hour Demonstration Session per week x 11 weeks, one 1-hour workshop session per week x 11 weeks and independent study (10 hours per week).

Assessment Strategy

The assessment strategy is designed to provide students with the opportunity to demonstrate proficiency in applying pricing techniques:

Preparing  and discussing short exercises in demonstration sessions and workshops on weekly basis will facilitate acquisition of skills necessary to approach the in class test and the final examination, where solving similar exercises or problems involving appropriate pricing techniques will be required.

In class test feedback in the form of a summary score will provide students with a measure of learning success and expectation of subsequent performance on the final examination.

Final examination and overall module score will provide students with a final measure of learning success and performance.

Thus, the summative assessment for this module consists of:


A one-hour in class test based on a mixture of short answer questions targeted at material covered in the tutorials and multiple choice questions targeted at theoretical lecture material reinforces learning and provides summative feedback part way through the module.
A final two hour examination provides the main summative assessment.


Formative assessment and feedback

Tutorials: Students will be asked to prepare short exercises distributed beforehand and discuss them in classroom. Verbal feedback will be provided.

In class test: Overall score within the range [0%,100%] based on: a) binomial scores from the set {0%,100%} on multiple choice questions; b) short answer question marks from within the range [0%,100%]; c) individual comments if and where appropriate.

Final examination: Overall score within the range [0%,100%] based on individual question marks from within the range [0%,100%] and individual comments if and where appropriate.

Reading list

Reading list for DERIVATIVES SECURITIES : http://aspire.surrey.ac.uk/modules/manm137

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 2017/8 academic year.