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ECO-30048 - Module Specification
Keele Business School
Faculty of Humanities and Social Sciences

For academic year: 2022/23 Last Updated: 19 January 2023

ECO-30048 - Risk Management with Derivatives
Coordinator: Ghulam Sorwar
Lecture Time: See Timetable...
Level: Level 6
Credits: 15
Study Hours: 150
School Office: 01782 733094

Programme/Approved Electives for 2022/23

None

Available as a Free Standing Elective

Yes

Co-requisites

None

Prerequisites

None

Barred Combinations

None

Description for 2022/23

This module deals with risk management techniques that rely on the use of derivative contracts, i.e. options, forwards, and futures. The pricing of options and other derivatives depends on three key factors:
1. the volatility of the underlying assets;
2. the extensive use of arbitrage arguments to price assets; and
3. the present value and discounting procedures to value streams of cash flows.
Bringing these three elements together, drawing on methods learned in ECO-20007 (Finance 1) (or, previously, ECO-10017 Economics for Financial Markets and ECO-20041 Asset Pricing) and ECO-20051 (Finance 2) (or, previously, ECO-20044 Portfolio Choice), and deepening the understanding of each, it will be shown how complex derivatives, such as options, futures, and forward contracts can be analysed.

Aims
This module deals with risk management techniques that rely on the use of derivative contracts, i.e. options, forwards, and futures. The valuation of derivatives is based on present value, discounting and arbitrage procedures that have been trailed in ECO-20007 (Finance 1) (or, previously, ECO-10017 Economics of Financial Markets, and, ECO-20041 Asset Pricing) and ECO-20051 (Finance 2) (or, previously, ECO-20044 Portfolio Choice.) Bringing these three elements together and deepening the understanding of each, it will be shown how complex derivatives, like options and futures contracts can be analysed.

Talis Aspire Reading List
Any reading lists will be provided by the start of the course.
http://lists.lib.keele.ac.uk/modules/eco-30048/lists

Intended Learning Outcomes

analyse and understand the role of derivatives markets: 1
demonstrate an understanding of the role of arbitrage in the determination of the prices of derivatives: 1,2
demonstrate knowledge of the alternative mathematical models and techniques to price derivatives
: 1,2
critically evaluate alternative derivative trading strategies: 2
demonstrate the use of options and futures for hedging, arbitrage and speculative activity: 2
enhance numeracy skills and problem solving skills: 1,2

Study hours

20 hours lectures,
4 hours tutorials,
1 hour class test,
3 hours exam,
122 hours independent study including preparation for lectures, tutorials and assessments.

School Rules

None

Description of Module Assessment

1: Class Test weighted 40%
50 minute class test
50 minute problem solving class test

2: Open Book Examination weighted 60%
Take away exam.
A take-away exam which will be available on KLE for 24-hours to answer and submit their answers via Turnitin. Although students have been given significant time to complete this exam script, we expect most students to spend no more than 3 hours to complete and submit their answers via Turnitin (with a maximum of 2500 words). Answers should be as accurate and concise as possible. This Take-away Final exam includes six questions. Students are required to answer any three out of the six questions. All questions are equally weighted. The questions may involve descriptive /numerical or both.

Please note that for the 2022/23 Academic Year programmes may be adapted to operate in accordance with a flexible, digital approach. This means that there may be some changes made to how modules are delivered and assessed. The latest information will be provided to you by your School in module handbooks. We endeavour to give you as much notice as possible of any changes and details about the circumstance in which changes are made to programmes can be found in the Student Agreement, available at: https://www.keele.ac.uk/student-terms-and-conditions/

Last Updated: 19 January 2023