ØABED4200 Derivatives Course description

The market for financial derivatives is one of the biggest in the world. The most important derivative securities are forwards, futures, options, and swaps. Derivatives are central instruments for companies when they deal with risk. This subject focuses on how companies and other institutions can reduce risk by using derivatives contracts.

Language of instruction is English.

ØABED3500 or ØABED4600 Investments

None

After completing the course, the student should have the following overall learning outcomes defined in terms of knowledge, skills and general competence:

Knowledge

The student

• has advanced knowledge of markets, trading and valuation of forwards, futures, options and swap contracts
• has in-dept knowledge about the theories behind valuation models such as Cost of carry for futures and Binominal and Black-Scholes for options
• has in-dept knowledge about central risk measures such as delta, gamma, vega, theta and rho
• can analyze new problems using valuation models such as Cost of carry for futures and Binominal and Black-Scholes for options

Skills

The student can

• analyze existing theories and methods in derivatives pricing
• work independently on practical problems in valuing and trading derivatives contracts.
• use valuation models such as Cost of carry for futures and Binominal and Black-Scholes for options independently

General competence

The student can

• contribute to the development and innovation of the use of derivatives contracts
• communicate extensive and independent work in the use of derivatives contracts

The course is taught in lectures.

The following coursework requirements must have been approved in order for the student to take the exam:

• Coursework 1: Futures
• Coursework 2: Swaps
• Coursework 3: Options 1
• Coursework 4: Options 2
• Coursework 5: Futures, Swaps and Options

All of the coursework requirements are submissions of approximately 2-3 pages, written individually.

The goal of the assignments are to help the students reflect over own independent work on practical problems in valuing and trading derivatives contracts and to use valuation models such as Cost of carry for futures and Binominal and Black-Scholes for options independently.

All required coursework must be completed and approved by the given deadline in order for the student to take the exam. If one or more coursework requirements have not been approved, the student will be given one opportunity to submit an improved version by the given deadline.

The exam in the course is a supervised exam of 4 hours.

The following aids are permitted:

• Calculator (see regulations for the use of calculators in the programme description)
• One dictionary (either first language-English/English-first language or English/English)

Grade scale A-F

The exam papers are assessed by one internal and one external examiner.

At least 25% of the exam papers will be assessed by two examiners. The grades awarded for the papers assessed by two examiners form the basis for determining the level for all the exam papers.

Students who have the subject ØABED3800 Derivatives in their bachelor's degree are not allowed to take this course.