ICM308-Stock Index Futures

Module Provider: ICMA Centre
Number of credits: 20 [10 ECTS credits]
Level:7
Terms in which taught: Summer term module
Pre-requisites:
Non-modular pre-requisites:
Co-requisites:
Modules excluded:
Current from: 2019/0

Email: c.sutcliffe@icmacentre.ac.uk

Type of module:

Summary module description:

This less quantitative module is an in-depth study of an important financial product - stock index futures. It covers how they are traded, why they are traded, how they are priced, how to arbitrage between index futures and equity markets, and how to design new stock index futures.

Aims:

This module is an option for ICMA Centre MSc students taking a 12 month degree, and will cover the usage of stock index futures. It is a less quantitative option open to all MSc students that builds on the coverage of futures in ICM107 Securities, Futures and Options.

Assessable learning outcomes:

By the end of this module it is expected that students will be aware of:-

• the different ways of constructing stock market indices and the implications of these differences


• how futures contracts are traded


• the identity of some of the close substitutes for trading index futures


• how stock index futures can be priced using an arbitrage relationship


• the basis and the use of spread trading


• how stock index futures can be used for hedging the price risk of the underlying


• the various uses that fund managers make of stock index futures.

Additional outcomes:

It will give students a solid understanding of one type of heavily traded financial instrument. The classwork will improve the ability of students to solve numerical problems.

Outline content:

1. Stock Market Indices

2. Introduction to Trading Stock Index Futures

3. Arbitrage and the Valuation of Stock Index Futures

4. Arbitrage in Practice

5. The Bases and Spread Trading of Stock Index Futures

6. Maturity, Price Volatility and Volume

7. Market Efficiency

8. Hedging Using Stock Index Futures

9. The Uses of Stock Index Futures by Fund Managers

10. Design and Regulation of Futures

Brief description of teaching and learning methods:

Lectures will be used to introduce the theory and concepts covered in the module. Seminars will allow the students to discuss the classwork problems, which will illustrate the concepts covered in this module.

Summative assessment- Examinations:

One 2 hour closed book exam

Summative assessment- Coursework and in-class tests:

1 hour MCQ test.

Formative assessment methods:

One 2 hour closed book exam

Penalties for late submission:
Penalties for late submission on this module are in accordance with the University policy. Please refer to page 5 of the Postgraduate Guide to Assessment for further information: http://www.reading.ac.uk/internal/exams/student/exa-guidePG.aspx

Assessment requirements for a pass:

50%

Reassessment arrangements:

By written examination only, as part of the overall examination arrangements for the MSc programme.

Additional Costs (specified where applicable):

Last updated: 23 April 2019