BFC3340 · Advanced derivatives

Overview

This unit builds on Derivatives to deepen conceptual understanding of option pricing and derivatives analysis. Topics include stochastic calculus concepts that underpin the Black-Scholes-Merton model, numerical approaches to option pricing, valuation of interest rate derivatives, exotic options, credit derivatives.

Offerings

Assessment

The Handbook lists an examination for this unit.

Assessment details may change. Please refer to the assessment information in Moodle closer to the start of the teaching period.

Requisites

Learning outcomes

1. develop an understanding of Wiener processes and Ito's Lemma as the basic building blocks for continuous time option pricing models. Derive the Black-Scholes-Merton differential equations
2. apply numerical procedures to price options especially exotic options
3. analyse interest rate derivatives
4. implement pricing models using technical programming languages
5. analyse and value swaps, credit default swaps and other derivatives and demonstrate how they can be used for risk management and speculation
6. apply critical thinking, problem solving and presentation skills to individual and/or group activities dealing with derivative instruments and demonstrate in an individual summative assessment task the acquisition of a comprehensive understanding of the topics covered by BFC3340.

Workload

Minimum total expected workload to achieve the learning outcomes for this unit is 144 hours per semester typically comprising a mixture of scheduled learning activities and independent study. Independent study may include associated readings, assessment and preparation for scheduled activities. You are expected to complete all pre-class activities prior to your scheduled class, and post-class activities should be completed after your scheduled class. Learning activities may include a combination of teacher directed, peer directed and online engagement activities.

Student experience, not official rules. Nothing here changes what the Handbook says.