Module Specifications..
Current Academic Year 2023 - 2024
Please note that this information is subject to change.
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Description To familarise students with the types and characteristics of the major classes of investment securities in use in domestic and international financial markets and the theory and practice of valuing those securities. This course is taught from the perspective of the investment manager | |||||||||||||||||||||||||||||||||||||||||
Learning Outcomes 1. Explain the role and use of derivatives in financial markets 2. Distinguish between the various interest rates in use in the markets – spot, forward, swap – and know how derive each from the others 3. Derive the payoff schedules for futures and put and call options 4. Use the geometric Brownian motion model of securities price behaviour to derive the Black-Scholes-Merton option-pricing model 5. Calculate the prices of various securities using (i) binomial trees, and (ii) Monte Carlo simulation 6. Assess the usefulness and limitations of the geometric Brownian motion model | |||||||||||||||||||||||||||||||||||||||||
All module information is indicative and subject to change. For further information,students are advised to refer to the University's Marks and Standards and Programme Specific Regulations at: http://www.dcu.ie/registry/examinations/index.shtml |
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Indicative Content and Learning Activities
1.Introduction, mechanics of futures markets, hedging strategies using futures2.Interest rates, determination of forward prices, interest rate futures3.Swaps: interest rate, currency4.Mechanics of options markets, properties of stock options5.Trading strategies involving options6.Binomial tree pricing7.Wiener processes and Itô’s lemma8.The Black-Scholes option pricing model9.Options on stock indices and currencies; futures options; the Greek letters10.Basic numerical procedures11.Estimating volatility and correlation; volatility smiles12.Exotic options | |||||||||||||||||||||||||||||||||||||||||
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Indicative Reading List
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Other Resources None | |||||||||||||||||||||||||||||||||||||||||
Programme or List of Programmes
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Date of Last Revision | 15-FEB-10 | ||||||||||||||||||||||||||||||||||||||||
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