IC317: Derivative Securities

Module code: IC317

Module provider: ICMA Centre; Henley Business School

Credits: 20

Level: Level 3 (Honours)

When you'll be taught: Semester 1

Module convenor: Dr Samah El Hajjar, email: s.elhajjar@icmacentre.ac.uk

Module co-convenor: Dr Mohd Pisal Zainal, email: m.p.zainal@henley.edu.my

Pre-requisite module(s): BEFORE TAKING THIS MODULE YOU MUST TAKE IC101 (Compulsory)

Co-requisite module(s):

Pre-requisite or Co-requisite module(s):

Module(s) excluded:

Placement information: na

Academic year: 2024/5

Available to visiting students: Yes

Talis reading list: Yes

Last updated: 27 June 2024

Overview

Module aims and purpose

From the 1970s to the present, derivatives markets are developing rapidly in terms of their market size and importance to the majority of market participants. Banks, corporations, governments and multi-national institutions utilise derivatives products, either simple or complex ones, to hedge risk and exploit opportunities. To understand the modern financial market and its practical applications, it’s inevitable to study derivatives. This module is an introduction to derivatives markets and instruments. We explore derivatives markets and their products mainly through theories and trading strategies. By the end of this module, students should be able to compare and contrast the features of futures, options, swaps, and other derivatives products. Interpret and apply derivatives pricing models. Critically discuss the application of financial derivatives to practical issues in risk management.

The module lead at the University of Reading Malaysia is Dr Mohd Pisal Zainal.

Module learning outcomes

By the end of the module, it is expected that students will be able to:

• identify and criticise the role and the functions of derivative markets within the financial markets;
• compare and contrast the key properties of the derivative instruments;
• interpret and analyse appropriate trading and hedging strategies with different derivatives products across markets;
• explain principles of derivatives pricing and conduct the essential calculations;

Module content

1. A brief overview of derivatives markets
2. An introduction to forwards and futures markets
3. Interest rate futures
4. Hedging strategies and pricing with forwards and futures
5. Options markets and options’ properties
6. Combining instruments and trading strategies
7. The basics of options pricing
8. Greeks
9. An introduction to Swaps and other derivatives

Structure

Teaching and learning methods

A combination of lectures and seminars. The interactive lectures will provide students a solid understanding of the topics covered for each week. During the seminars, students are guided through the solutions to the relevant pricing, hedging, and trading strategies exercises. Students will also encourage to work as a group during seminars. Discussion boards and office hours will be available for students during the semester.

This module may be taught in a different Semester if you are studying at our campus in Malaysia.

For students studying at our campus in Malaysia: This module may be taught in a different semester and the breakdown of study hours may differ to those set out in the Study Hours table (please refer to the Module Handbook for the correct breakdown). In addition, you will be required to complete an additional 40 hours of study, taking the total number of study hours to 240 for this module. This is to comply with the Malaysian Quality Agency (MQA).

In addition to the total 200 hours, students studying at the Malaysian campus will be required to complete an additional 40 hours of independent study totalling 240 hours of student learning time per semester per module in compliance with the Malaysian Quality Agency (MQA). The breakdown of study hours may differ at the Malaysian campus. For further details please refer to the module handbook.

Study hours

At least 34 hours of scheduled teaching and learning activities will be delivered in person, with the remaining hours for scheduled and self-scheduled teaching and learning activities delivered either in person or online. You will receive further details about how these hours will be delivered before the start of the module.

Please note the independent study hours above are notional numbers of hours; each student will approach studying in different ways. We would advise you to reflect on your learning and the number of hours you are allocating to these tasks.

Semester 1 The hours in this column may include hours during the Christmas holiday period.

Semester 2 The hours in this column may include hours during the Easter holiday period.

Summer The hours in this column will take place during the summer holidays and may be at the start and/or end of the module.

Assessment

Requirements for a pass

Minimum mark of 40% weighted average mark of group assignments and MC Exam

Summative assessment

Penalties for late submission of summative assessment

The Support Centres will apply the following penalties for work submitted late:

Assessments with numerical marks

• where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of three working days;
• the mark awarded due to the imposition of the penalty shall not fall below the threshold pass mark, namely 40% in the case of modules at Levels 4-6 (i.e. undergraduate modules for Parts 1-3) and 50% in the case of Level 7 modules offered as part of an Integrated Masters or taught postgraduate degree programme;
• where the piece of work is awarded a mark below the threshold pass mark prior to any penalty being imposed, and is submitted up to three working days after the original deadline (or any formally agreed extension to the deadline), no penalty shall be imposed;
• where the piece of work is submitted more than three working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.

Assessments marked Pass/Fail

• where the piece of work is submitted within three working days of the deadline (or any formally agreed extension of the deadline): no penalty will be applied;
• where the piece of work is submitted more than three working days after the original deadline (or any formally agreed extension of the deadline): a grade of Fail will be awarded.

The University policy statement on penalties for late submission can be found at: https://www.reading.ac.uk/cqsd/-/media/project/functions/cqsd/documents/qap/penaltiesforlatesubmission.pdf

You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

Formative assessment

Formative assessment is any task or activity which creates feedback (or feedforward) for you about your learning, but which does not contribute towards your overall module mark.

Ongoing feedback throughout all lectures, seminars and workshops.

Reassessment

Additional costs