BUU44650 Derivatives

(5 ECTS) 

Lecturer:

Niamh Wylie 

Email: wylien@tcd.ie 
Phone: 087 429 4294
Office Hours: By appointment, please email to arrange

Pre-Requisite: 

BUU22550 - Introduction to Finance

Module Description: 

Derivatives have become extremely popular investment tools over the past 30 years, as they allow investors to tailor the amount and type of risk they take, be it risk associated with changes in interest rates, exchange rates, stock prices, commodity prices, inflation and so on. They are used by institutions as well as investors, sometimes to hedge unwanted risks and sometimes to take on additional risk motivated by views regarding future market movements. This module examines the primary types of derivatives (forwards, futures, options and swaps), shows how they are used to achieve various hedging and speculating objectives, outlines a framework for pricing derivatives and studies some applications of derivative-pricing techniques outside derivative markets. The objective is to provide a good grounding in techniques and approaches for the measurement and management of financial risks.

Learning and Teaching Approach:

This module is structured around a series of lectures and tutorials. Lecture slides will be provided in advance of lectures. Students will be provided with practice questions and solutions will be discussed in tutorials.

Learning Outcomes:

Having completed this module, you should be able to:

1. Provide an understanding of derivatives and introduce the analytics of derivative valuation
2. Demonstrate how to value forward, futures, swaps and options
3. Describe and appraise how derivatives can be used to achieve various hedging and speculative strategies
4. Discuss various types of derivatives such as options on stock indices and currencies, futures options and exotic options
5. Evaluate previous derivative mishaps and what we can learn from them

Textbook and Readings:

Hull, J. (2017), Fundamentals of Futures and Options Markets, Eighth Edition, Pearson Education Limited

Reference will be made to additional material throughout the course. Please refer to Blackboard for details.

Assessment:

Assessment for this course will be as follows:

1. Derivatives Mid-Term Examination (Individual): 20%
2. Final Examination (Individual): 80%.