Main Field of Study and progress level:
Economics: Second cycle, has only first-cycle course/s as entry requirements
Grading scale: Pass with distinction, Pass, Fail
Responsible department: Department of Economics
Revised by: Rector of Umeå School of Business and Economics, 2021-10-28
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
Having finished the course, the student is expected to
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, and
be able to analyze the risks in options contracts by using the Greek letters.
Required Knowledge
90 credits of which at least 7.5 credits in mathematics containing calculus, such as One-dimensional calculus 1 or Mathematical Economics I D7. Proficiency in English equivalent to the Swedish upper secondary course English 6.
Form of instruction
The course is offered in the form of lectures, teacher-led exercises and seminars.
Examination modes
The examination consists of written examination at the end of the course.
A second exam opportunity is always offered within a short time span after the regular exam date for those students not achieving a Pass. The subsequent exam opportunity is either the re-take opportunity the week before the fall semester or the next regular exam date.
The following grading system will be used: Pass with Distinction (Väl Godkänd) Pass (Godkänd) Fail (Underkänd).
It is normally not possible to do additional examinations to reach a higher grade. Exceptions can be made for a student with the grade Fail on any of the examinations if the examiner (not the lecturer) finds this appropriate. The task must be a minor undertaking, closely related to the learning outcome not reached, and performed in close proximity to the original examination.
When a student has failed an examination on two occasions, he or she has a right to have another grading teacher. A written request for an alternative examiner should be handed to the Dean of the Business School.
Credit transfer Academic credit transfers are according to the University credit transfer regulations.
Literature
Valid from:
2022 week 1
Hull John Options, futures, and other derivatives Eleventh edition : Harlow : Pearson : [2022] : 880 sidor : ISBN: 9781292410654 Search the University Library catalogue
