Main Field of Study and progress level:
Economics: Second cycle, has only first-cycle course/s as entry requirements
Grading scale: Three-grade scale
Responsible department: Department of Economics
Revised by: Rector of Umeå School of Business and Economics, 2015-01-22
Contents
The objective of the course is to provide a deep knowledge and understanding for financial derivatives. The course starts by describing the futures market. The mechanics of the futures markets, hedging strategies using futures and the determination of forward and futures prices are described. A subsequent part of the course covers interest and currency swap contracts. The second part of the course is devoted to options. Mechanics of options markets, properties of stock options and trading strategies involving options are covered. Other topics regard binomial trees, Wiener processes and Ito´s Lemma, the Black-Scholes-Merton model for option pricing, options on stock indices, the Greek letters, volatility smiles and estimation procedures. Credit risk, credit derivatives, exotic options and interest rate derivatives are also covered.
Expected learning outcomes
Upon completing this module, students should;
- know how to use futures, swap and options contracts to hedge against different types of risk, - know how to determine the prices in different types of futures and swap contracts, - be able to use the formal tools to determine option prices, - be able to analyze the risks in options contracts by using the Greek letters,
Required Knowledge
Mathematics for Economists I D7 and Econometrics I D12 or the equivalent is required. Students are also required to have English B/6 from Swedish gymnasium or the equivalent.
Form of instruction
The education is given in form of lectures, teacher-led exercises and seminars.
Examination modes
The examination consists of a written exam at the end of the course.
Students that not recieves the grade Pass or Pass with Distinction on the first exam have the possibility to write a second exam within a close time. Subsequently exam opportunities are given the next time the course is offered. In addition to these opportunities are all exams offered in August each year. Contact the study advisor for more information
Students with the grade Pass or Passed with Distinction are not eligible to write a new exam in order to raise the grade. A student that has failed on two exams on the same module has the right to apply for a new lecturer correcting the exam. The application has to be sent to the rector of USBE.
Credit Transfer Academic credit transfers are according to the University credit transfer regulations.
Literature
Valid from:
2014 week 31
Hull John Options, futures, and other derivatives 6. ed. : Upper Saddle River, N.J. : Pearson Prentice Hall : cop. 2006 : xxii, 789 s. : ISBN: 0-13-149908-4 (inb.) Mandatory Search the University Library catalogue
