Module Code: H9DRM
Long Title Derivatives and Risk Managment
Title Derivatives and Risk Managment
Module Level: LEVEL 9
EQF Level: 7
EHEA Level: Second Cycle
Credits: 10
Module Coordinator: CORINA SHEERIN
Module Author: JULIA REYNOLDS
Departments: School of Business
Specifications of the qualifications and experience required of staff  
Learning Outcomes
On successful completion of this module the learner will be able to:
# Learning Outcome Description
LO1 Demonstrate an advanced comprehension of the techniques used in the valuation of derivatives and the quantification of risk.
LO2 Critically evaluate contemporary academic and industry literature regarding derivative pricing models with particular emphasis on the deficiencies of models and their application in complex scenarios.
LO3 Select, categorise and appraise the risk management characteristics of each type of derivative studied, explaining how the derivatives may be hedged themselves or used for the hedging of real world risk management problems.
LO4 Develop a framework to categorise and evaluate various portfolio risk measurement techniques and demonstrate a knowledge of the current theoretical and applied knowledge regarding their limitations
Dependencies
Module Recommendations

This is prior learning (or a practical skill) that is required before enrolment on this module. While the prior learning is expressed as named NCI module(s) it also allows for learning (in another module or modules) which is equivalent to the learning specified in the named module(s).
No recommendations listed
Co-requisite Modules
No Co-requisite modules listed
Entry requirements

There are no additional entry requirements for this module.  The programme entry requirements apply. 
 

Module Content & Assessment

Indicative Content
Derivatives and Future Markets
Forward contracts, Futures contracts, Options. Specification of a futures contract, Convergence of futures price to spot price, The operation of margin accounts. Forward vs. futures contracts.
Hedging strategies using futures
Basic principles, Arguments for and against, Basis risk, Cross hedging, Stock index futures, Stack and roll.
Determination of forward and futures prices
Investment assets vs. consumption assets, Short selling, Assumptions and notation, Forward price for an investment asset, Known income, Known yield, Valuing forward contracts, Are forward prices and futures prices equal?, Futures prices of stock indices, Forward and futures contracts on currencies, Futures on commodities, The cost of carry, Delivery options, Futures prices and expected future spot prices.
Swaps
Mechanics of interest rate swaps, Valuation of interest rate swaps, Credit risk, Credit default swaps Mechanics of options markets Types of options, Option positions, Underlying assets, Specification of stock options, Trading, Commissions, Margin requirements.
Properties of stock options
Factors affecting option prices, Assumptions and notation, Upper and lower bounds for option prices, Put–call parity, Calls on a non-dividend-paying stock, Puts on a non-dividend-paying stock, Effect of dividends.
Trading strategies involving options
Naked options, Hedges, Spreads, Combinations
Binomial trees
A one-step binomial model and a no-arbitrage argument, Risk-neutral valuation, Two-step binomial trees, A put example, American options, Delta, Matching volatility with u and d, The binomial tree formulas, Increasing the number of steps.
The Black–Scholes–Merton model
Lognormal property of stock prices, The distribution of the rate of return, The expected return, Volatility, The idea underlying the Black–Scholes–Merton differential equation, Derivation of the Black–Scholes–Merton differential equation, Risk-neutral valuation, Black–Scholes– Merton pricing formulas.
Value at risk and expected shortfall
The VaR and ES measures, Historical simulation, Model-building approach, The linear model, The quadratic model, Monte Carlo simulation, Comparison of approaches, Back testing, Principal components analysis
Assessment Breakdown%
Coursework40.00%
End of Module Assessment60.00%

Assessments

Full Time

Coursework
Assessment Type: Continuous Assessment % of total: 40
Assessment Date: n/a Outcome addressed: 1,3
Non-Marked: No
Assessment Description:
Candidates are required to complete one in-class test, which is a mix of theoretical and problem-based questions. The in-class examination will be worth 40%
End of Module Assessment
Assessment Type: Terminal Exam % of total: 60
Assessment Date: End-of-Semester Outcome addressed: 1,2,3,4
Non-Marked: No
Assessment Description:
Final Examination, which will consist of an Excel-based exam.
No Workplace Assessment
Reassessment Requirement
Repeat examination
Reassessment of this module will consist of a repeat examination. It is possible that there will also be a requirement to be reassessed in a coursework element.
Reassessment Description
Repeat assessment of this module will consist of a repeat examination which will test all the learning outcomes.

NCIRL reserves the right to alter the nature and timings of assessment

 

Module Workload

Module Target Workload Hours 0 Hours
Workload: Full Time
Workload Type Workload Description Hours Frequency Average Weekly Learner Workload
Lecture Classroom and demonstrations 36 Per Semester 3.00
Directed Learning Directed e-learning 36 Per Semester 3.00
Independent Learning Independent learning 178 Per Semester 14.83
Total Weekly Contact Hours 6.00
 

Module Resources

Recommended Book Resources
  • Hull J. C. (2018), Options, Fututres and Other Derivatives, 10th Ed. Pearson Prentice Hall.
Supplementary Book Resources
  • Hull, J. C. (2018), Risk Management and Financial Institutions, 5th Ed. Wiley.
This module does not have any article/paper resources
This module does not have any other resources
Discussion Note: