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SSST Subjects

EC470 Financial Instruments

 
 

Programme(s) where module is offered

  • BSc in Business and Management with Finance
 

Status (core, option, free choice)

Option (finance minor)

 

FHEQ Level

6

 

Unit Value

6 ECTS

 

Semester taught

Spring

 

Pre-Requisite Modules or Qualifications

EC150 Mathematics, EC170 Statistics

 

Module Code

EC470

 

Module coordinator

Amer Demirovic

 

Applicable From

2017

 

Educational Aims of the Module

  • The module aims to develop a critical understanding of financial instruments, the valuation of financial instruments and application of major finance principles to business and other disciplines.
  • The module will cover the fundamental features of asset classes and financial principles underlying the asset pricing. After covering the main principles and concepts (risk vs. return, systematic vs. non-systematic risk, no-arbitrage, risk neutral valuation) the module will cover valuation of major equity, debt and derivative instruments.
  • Finally, the module will cover real options and other applications of finance tools to business and economics problems.
 

Module Outline/Syllabus

  • The underlying principles: time value of money, risk-return, systematic vs. idiosyncratic risks, risk neutral valuation

  • Random behaviour of asset prices: statistical analysis of asset prices

  • Fixed income securities: loans and bonds

  • Equity securities: stocks, indices

  • Derivative securities: forwards and stock options

  • Properties of stock options

  • Valuing the options in discrete time: binomial trees

  • Valuing the options in continuous time: Black-Scholes-Merton

  • Credit risk and credit derivatives

  • Real options and other application of finance tools in business and economics

 

Student Engagement Hours

Type Number per Term Duration Total Time

Lectures

15 1.5 22.5

Workshops

5 1.5 7.5

Seminars

5 1.5 7.5
Tutorials 5 1.5 7.5

Total Contact Hours

45.0

Total Guided/Independent Learning Hours

105.0
Total Engagement Hours 150.0
 

Assessment Method Summary

Type Number Required Duration / Length Weighting Timing / Submission Deadline

Mid-semester test

1

2 hours

20%

Week 8

Group investment report

Presentation

1

2,000 words

 

20 minutes

20%

 

10%

Week 15

Final Exam

1

3 hours

50%

Week 17

 

Module Outcomes

Intended Learning Outcomes:

  • A systemic understanding of finance principles and theories underlying the valuation of financial instruments

  • Ability to accurately apply finance theories to estimate the value of assets

  • Critical understanding of uncertainty in finance and business

  • Ability to apply finance theories to other disciplines and problems.

Teaching and Learning Strategy:

  • Lectures (ILO: 1-4)

  • Workshops (ILO: 1-4)

  • In-class problem solving (ILO: 2)

Assessment Strategy:

  • Midterm exam and test (ILO: 1-2)

  • Final exam (ILO: 1-4)

  • Group investment report (ILO: 2-3)

Practical Skills:

  • Interpret market data

  • Evaluate prices of financial instruments and physical assets

  • Use finance models in everyday business

Teaching and Learning Strategy:

  • Lectures (PS: 1-3)

  • In class problem solving (PS: 1-3)

Assessment Strategy:

  • Lectures (PS: 1-3)

  • Workshops (PS: 1-3)

  • Group investment report (ILO: 2-3)

Transferable Skills:

  • Research Skills

  • Numerical Skills

  • IT Skills

  • Communication Skills

Teaching and Learning Strategy:

  • In-class problem solving (TS: 1-2)
  • Workshops and in-class problem solving (TS: 3)

Assessment Strategy:

  • Tests and exams (TS: 2)

  • Group investment report (TS: 1, 4)

  • Workshops (TS: 3)

 

Key Texts and/or other learning materials

Set text

  • Hull J. (2014), Fundamentals of Futures and Options Markets, Global Edition, 8th Edition, Pearson

Supplementary Materials

  • Arnold, G., (2015), FT Guide to Bonds and Money Markets, Financial Times

  • De Rosa, D., (2011), Options on Foreign Exchange, 3 Edition, John Wiley & Sons

  • Fabozzi, F.J., (2015), Capital Markets: Institutions, Instruments, and Risk Management, The MIT Press

  • Parameswaren, S., (2011), Fundamentals of Financial Instruments: An Introduction to Stocks, Bonds, Foreign Exchange and Derivatives, John Wiley & Sons

  • Steiner, B., (2012), Mastering Financial Calculations: A step-by-step guide to the mathematics of financial market instruments, FT Press

  • Taylor, F., (2010), Mastering Derivatives Markets: A Step-by-Step Guide to the Products, Applications and Risks, FT Press

  • Institutional Investor Journals (2017) The Journal of Derivatives, http://www.iijournals.com/toc/jod/current

Please note

This specification provides a concise summary of the main features of the module and the learning outcomes that a typical student might reasonably be expected to achieve and demonstrate if he/she takes full advantage of the learning opportunities that are provided.

More detailed information on the learning outcomes, content and teaching, learning and assessment methods of each module and programme can be found in the departmental or programme handbook.

The accuracy of the information contained in this document is reviewed annually by the University of Buckingham and may be checked by the Quality Assurance Agency.

Date of Production : January 2017

Date approved by School Learning and Teaching Committee

Date approved by School Board of Study

Date approved by University Learning and Teaching Committee

Date of Annual Review

       
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