Unit Outline

Derivatives or derivative securities are (as the name suggests) derived from other securities. Derivatives are used for a number of purposes, including insuring against price movements (hedging), increasing one’s exposure to price movements (speculation) or getting access to an otherwise hard-to-trade asset or market (market completion). The unit is comprised of three main modules: Options, Futures and Swaps. Topics covered include currency and futures contracts, pricing derivative securities, behaviour of share prices forward contracts, coupon swaps, interest rate derivative securities and other derivative securities, share options, options on stock indices, binomial, and Black-Scholes option pricing, hedging positions in options, advanced trading strategies, and exotic options. After completing this unit, students will be familiar with derivatives valuation and their use in risk management. The acquired skills will be useful in the management of financial risks in the financial sectors.

Intended Learning Outcomes

As per the Assessment and Results Policy 1.3, your results will reflect your achievement against specified learning outcomes.

On completion of this unit, you will be able to:


1.	Determine the mechanics of derivative instruments and their markets
2.	Design and communicate collaborative derivative strategies to specialist and non-specialist audiences
3.	Critically analyse market data to price derivative instruments
4.	Apply derivative solutions to satisfy the needs of key organisational stakeholders

Alterations as a result of student feedback

To be determined.

How will I be Assessed?

For more detailed assessment information please see MyLO.

Assessment schedule


ASSESSMENT TASK #	ASSESSMENT TASK NAME	DATE DUE	WEIGHT	LINKS TO INTENDED LEARNING OUTCOMES
Assessment Task 1:	Group Assignment	Week 12	20 %	LO1, LO2, LO3, LO4
Assessment Task 2:	Online quizzes	Refer to Assessment Description	40 %	LO1, LO2, LO3
Assessment Task 3:	Take-home Examination	Exam Period	40 %	LO1, LO2, LO3, LO4

Assessment details

Assessment Task 1: Group Assignment

Task Description:

Students are required to form a group consisting of up to three students to complete the assignment. The assignment will consist of questions covering topics from Week 1 to Week 11. This is a group assignment and students are required to work collaboratively. Each group is required to provide report with individual contributions (as a percentage) on the cover sheet. This will be used to assess criterion 8. Each group must assign a specific task to every group member, and this must be included in the report. This will be used to assess individual group member's contribution in the group assignment.

The details of the assignments will be posted on the MyLO website.

Task Length:

Task length: 1500 words including figures and tables

Due Date:

Week 12

Weight:

20 %

CRITERION #

CRITERION

MEASURES INTENDED

LEARNING OUTCOME(S)


1	Estimate derivative prices, quantities and positions	LO2
2	Compare and contrast the mechanics of options, forwards, futures and swaps	LO2
3	Make decisions concerning the use of derivatives	LO4
4	Construct and implement speculative and hedging strategies	LO1
5	Estimate the price of forwards, futures, swaps and options contracts	LO3
6	Price options using the binomial option pricing model and the Black-Scholes option pricing model	LO3
7	Analyse market data to identify potential systemic risks associated with derivative markets	LO3
8	Work productively in a group to communicate and recommend the derivative strategies to a specialist and non-specialist audience in a written report.	LO2

Assessment Task 2: Online quizzes

Task Description:

Two Online quizzes: contains multiple choice questions to be answered in 60 minutes. Each test is worth 20% marks.

Online test 1: In week 4 and cover topics from weeks 1 to 3.

Online test 2: In week 8 and cover topics from weeks 1 to 7.

Task Length:

60 minutes per quiz

Due Date:

Refer to Assessment Description

Weight:

40 %

CRITERION #

CRITERION

MEASURES INTENDED

LEARNING OUTCOME(S)


1	Determine derivatives products	LO1
2	Compare derivative concepts	LO1
3	Assess the mechanics of derivative markets	LO1
4	Estimate derivative prices, quantities and positions	LO2
5	Estimate the price of forwards, futures, swaps and options contracts	LO3

Assessment Task 3: Take-home Examination

Task Description:

The final exam will cover all the topics/materials from Week 1 up to and including Week 13.
The final exam will comprise multiple choice, short-essay questions and problems.

Task Length:

24 hours

Due Date:

Exam Period

Weight:

40 %

CRITERION #

CRITERION

MEASURES INTENDED

LEARNING OUTCOME(S)


1	Estimate derivative prices, quantities and positions	LO2
2	Compare and contrast the mechanics of options, forwards, futures and swaps	LO2
3	Make decisions concerning the use of derivatives	LO4
4	Construct and implement speculative and hedging strategies	LO1
5	Estimate the price of forwards, futures, swaps and options contracts	LO3
6	Price options using the binomial option pricing model and the Black-Scholes option pricing model	LO3
7	Critically analyse derivative strategies that promote sustainable economic growth	LO3

How your final result is determined

To pass this unit, you need to demonstrate your attainment of each of the Intended Learning Outcomes, achieve a final unit grade of 50% or greater, and pass any hurdle tasks.

Submission of assignments

Where practicable, assignments should be submitted to an assignment submission folder in MYLO. You must submit assignments by the due date or receive a penalty (unless an extension of time has been approved by the Unit Coordinator). Students submitting any assignment in hard copy, or because of a practicum finalisation, must attach a student cover sheet and signed declaration for the submission to be accepted for marking.

Academic integrity

Academic integrity is about acting responsibly, honestly, ethically, and collegially when using, producing, and communicating information with other students and staff members.

In written work, you must correctly reference the work of others to maintain academic integrity. To find out the referencing style for this unit, see the assessment information in the MyLO site, or contact your teaching staff. For more detail about Academic Integrity, see Important Guidelines & Support.

Requests for extensions

If you are unable to submit an assessment task by the due date, you should apply for an extension.

A request for an extension should first be discussed with your Unit Coordinator or teaching support team where possible. A request for an extension must be submitted by the assessment due date, except where you can provide evidence it was not possible to do so. Typically, an application for an extension will be supported by documentary evidence: however, where it is not possible for you to provide evidence please contact your Unit Coordinator.

The Unit Coordinator must notify you of the outcome of an extension request within 3 working days of receiving the request.

Late penalties

Assignments submitted after the deadline will receive a late penalty of 5% of the original available mark for each calendar day (or part day) that the assignment is late. Late submissions will not be accepted more than 10 calendar days after the due date, or after assignments have been returned to other students on a scheduled date, whichever occurs first. Further information on Late Penalties can be found on the Assessments and Results Procedure.

Review of results and appeals

You are entitled to ask for a review of the marking and grading of your assessment task if there is an irregularity in the marking standards or an error in the process for determining the outcome of an assessment. Details on how to request a review of a mark for an assignment are outlined in the Review and Appeal of Academic Decisions Procedure.

Required Resources

Required reading materials

You will need the following text [available from the Co-op Bookshop]:

An Introduction to Derivative Securities, Financial Markets, and Risk Management (2nd Edition) by (author): Robert Jarrow (Cornell University, USA) and Arkadev Chatterjea (Indiana University, USA). Pages: 772 | July 2019. ISBN: 9781944659653 (paperback).