This module is not currently running in 2024 to 2025.
This module is concerned with International Investment Banks’ products and strategies that involve the description and analyses of the characteristics of more commonly used financial derivative instruments such as forward and future contracts, swaps, and options involving commodities, interest, and equities markets. Modern financial techniques are used to value financial derivatives. The main emphasis of the module is on how International Investment Banks value, replicate, and arbitrage the financial instruments and how they encourage their clients to use derivative products to implement risk management strategies in the context of corporate applications.
In particular, students will first cover the topics related to forward, futures and swap contracts. They will then be introduced to options and various strategies thereof. Valuing options using Black-Scholes model and binomial trees is also an important part of the module. The important finance concepts of no-arbitrage and risk-neutral valuation and their implications for pricing financial derivatives are also covered in the module. This will help students to learn the techniques used in valuing financial derivatives and hedging risk exposure.
Successful completion of the module will provide a solid base for the student wishing to pursue a career in International Investment Banking and Treasury Management. The students will have the knowledge of essential techniques of risk management and financial derivative trading.
Total contact hours: 65
Private study hours: 235
Total study hours: 300
Main assessment methods:
In-Course Test 1 (10%)
In-Course Test 2 (10%)
In-Course Test 3 (10%)
Examination, 3 hour (70%)
Reassessment method:
100% exam
Fundamentals of Futures and Options Markets, 7th Edition, by Hull, J., Pearson Education, London.
Principles of Corporate Finance (Global Edition), 9th Edition-2008, by Brealey, Myers, and Allen. Chapters 20, 21, 27, and 28, McGraw Hill.
See the library reading list for this module (Canterbury)
The intended subject specific learning outcomes.
On successfully completing the module students will be able to:
- demonstrate knowledge and understanding of various financial derivative instruments and risk management techniques in the context of International Investment Banking;
- demonstrate knowledge and understanding of the application of appropriate financial techniques that are used to value financial derivatives
- demonstrate knowledge and understanding of concepts and principles under which financial derivative instruments are traded;
- use subject knowledge to analyse the problem and provide a reasoned response to that problem in the context of risk management;
- compare and contrast alternative risk management strategies;
- prepare appropriate diagrams to reflect various trading strategies, binomial trees, etc;
- analyse risk management techniques using financial derivative instruments;
- use financial derivative instruments to implement risk management strategies.
The intended generic learning outcomes.
On successfully completing the module students will be able to:
- apply numeracy skills to solve numerical problem;
- develop and define complex argument and provide critical insights on the use of financial instruments and risk management;
- read and summarise transactions and economic events related to financial management and derivative securities;
- locate, extract, and analyse data from different sources, e.g. newspapers, library, internet, etc, to be presented in an appropriate format;
- plan and work independently using various learning resources;
- use information technology to acquire, analyse, and communicate effectively.
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