Derivative Securities - MACT9160

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Module delivery information

Location Term Level1 Credits (ECTS)2 Current Convenor3 2021 to 2022
Canterbury
Combined Autumn and Spring Terms 7 30 (15) Pradip Tapadar checkmark-circle

Overview

This module introduces different financial derivative contracts available in the market, develops pricing techniques and risk management tools to manage risks associated with a portfolio of derivative contracts. Principle of no-arbitrage, or absence of risk-free arbitrage opportunities, is applied to determine prices of derivative contracts, within the framework of binomial tree and geometric Brownian motion models. Interest rate models and interest rate derivatives are discussed in detail. Credit risk models are introduced in the context of pricing defaultable bonds and credit derivatives. Outline syllabus includes: An introduction to derivatives, futures and forward, options and trading strategies, binomial tree model, Black-Scholes option pricing formula, Greeks and derivative risk management, numerical techniques, exotic options, interest rate models and interest rate derivatives, credit risk and credit derivatives.

To follow professional curriculum of the Faculty and Institute of Actuaries examination SP6 – https://www.actuaries.org.uk/studying/curriculum/investment-and-finance.
This is a dynamic syllabus, changing regularly to reflect current practice.

Details

Contact hours

Standard Delivery - Total contact hours: 72
Tutorial Delivery - Total contact hours: 36

Teaching methods will differ according to the number of students registered on the module. The standard format, for more than 6 students registered.

Method of assessment

80% Examination, 20% Coursework

Indicative reading

The following textbooks are recommended:
JC Hull: Options, Futures and Other Derivatives 6th Edition (Prentice Hall)
Baxter & Rennie: Financial Calculus (Cambridge University Press 1997)

The students will be provided with the study notes published by the Actuarial Education Company for Subject SP6. These are ordered from the Company by the Lecturer.

See the library reading list for this module (Canterbury)

Learning outcomes

The intended subject specific learning outcomes. On successfully completing the module students will be able to:

1 Demonstrate knowledge and understanding of complex techniques applicable to solve problems in Derivative Securities in the context of current professional actuarial practice.
2 Demonstrate knowledge and understanding of complex current issues in Derivative Securities in the context of current professional actuarial practice.
3 Demonstrate a high level of understanding of the main body of knowledge for the module.
4 Demonstrate skill in calculation and manipulation of the material written within the module.
5 Apply a range of concepts and principles of Derivative Securities in various contexts.
6 Demonstrate skill in solving problems in Derivative Securities by various appropriate methods.
7 Demonstrate skills in the specific mathematical and statistical techniques used in the actuarial practice of Derivative Securities and their application to solving problems in that subject.
8 Demonstrate understanding of the current practical applications of the module material.

The intended generic learning outcomes. On successfully completing the module students will be able to:

1 Demonstrate ability for logical argument.
2 Demonstrate ability to work with relatively little guidance.
3 Demonstrate high-level problem-solving skills, relating to qualitative and quantitative information, demonstrating self-direction and originality of thought.
4 Demonstrate communications skills, covering both written and oral communication, with the ability to communicate clearly to both specialist and non-specialist audiences using the appropriate information technology.
5 Demonstrate judgemental skills.
6 Demonstrate numeracy and computational skills.
7 Demonstrate time-management and organisational skills, as evidenced by the ability to plan and implement efficient and effect modes of working, and to act autonomously.
8 Demonstrate study skills needed for continuing professional development.
9 Demonstrate decision-making skills in complex situations.

Notes

  1. Credit level 7. Undergraduate or postgraduate masters level module.
  2. ECTS credits are recognised throughout the EU and allow you to transfer credit easily from one university to another.
  3. The named convenor is the convenor for the current academic session.
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