Understand the operations and purpose of the forward and futures markets. You will examine the factors affecting the value of forwards and futures prices, and learn to interpret price movements. You will also use methods such as “Black Scholes” and “Binomial” to calculate the value of a traded option, and learn to apply strategies to hedge risk positions through financial futures.

Module Description

This module aims to extend student’s knowledge and understanding of the risk-return trade-off in financial markets to derivative instruments and the models used to value them in practice.

Module Content

The operation of forward and futures markets
Hedging strategies using futures
Interest rate futures
Factors affecting forward and future prices
Swaps
The operation of the options market
Stock options
Option trading strategies
Valuation of stock options using the Black Scholes model
Valuation of stock options using the Binomial model

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