Registry

Module Specifications

Current Academic Year 2012 - 2013
Please note that this information is subject to change.

Module Title	Derivatives
Module Code	EF504
School	DCUBS
Online Module Resources
Module Co-ordinator	Semester 1: Brian O'Kelly Semester 2: Brian O'Kelly Autumn: Brian O'Kelly
NFQ level	8	Credit Rating	5
Pre-requisite	None
Co-requisite	None
Compatibles	None
Incompatibles	None

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

Workload	Full-time hours per semester
*Type*	*Hours*	*Description*
Lecture	2	No Description
Total Workload: 2

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

Indicative Content and Learning Activities

The nature and characteristics of financial instruments.- Financial intermediaries and international securities markets.- National and international money markets and institutions.- The fundamental nature and characteristics of the following classes of financial assets will be examined in terms of risk, return, valuation, marketability and performance evaluation. The appropriateness of each class in practical investment decision making is stressed together with the principle features of each market. Equities Characteristics.
Risk, market features, performance. Valuation: Present value approach, earnings, dividends, assets. Fixed Interest Securities (including convertible and index-linked securities) Characteristics:Risk, market features, performance, types of fixed interest security.Valuation: Yields, term structure of interest rates. Cash Instruments Characteristics: Types of instrument, risk, market features. Valuation: Yield calculations in different cash instruments, money market yield curve. Options, warrants and futures contracts Each of these instruments will be introduced to the extent that students will be familiar with the key features of the products, their valuation and uses and the markets in which they are traded. Advanced usage for hedging/speculation etc. is dealt with in the second-year courses in Treasury and Portfolio Management. CurrenciesThe effect of currency risk on return and local market risk, spot and forward exchange rates, swap points, triangular arbitrage, features of the forex market..

Assessment Breakdown
Continuous Assessment	25%	Examination Weight	75%

Course Work Breakdown
Type	Description	% of total	Assessment Date
Assignment	n/a	25%	n/a

Reassessment Requirement
Resit arrangements are explained by the following categories; 1 = A resit is available for all components of the module 2 = No resit is available for 100% continuous assessment module 3 = No resit is available for the continuous assessment component
This module is category 1

Indicative Reading List

.: 0, Course material is drawn from a number of different texts. Recommended reading includes:Cutherbertson, K. Quantitiative Financial Economics: Stocks, Bonds and Foreign Exchange, Wiley 1996Solnik, B., International Investments, 3rd edition Addison Wesle,

Other Resources

None

Array

Programme or List of Programmes

MITB

MSc in Investment, Treasury & Banking

PBSSA

PG Exchange(Business School)

PBSSAO

PG Study Abroad(Business School)

Timetable this semester: Timetable for EF504

Date of Last Revision