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Derivative Securities (FNCE30007)
Undergraduate level 3Points: 12.5On Campus (Parkville)
About this subject
- Overview
- Eligibility and requirements
- Assessment
- Dates and times
- Further information
- Timetable(opens in new window)
Contact information
Overview
Availability | Semester 1 Semester 2 |
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Fees | Look up fees |
This subject focuses on the application and valuation of derivative securities, such as forwards, futures, swaps and options. The emphasis will be on arbitrage relations, valuation, and hedging with derivatives. The topics covered include; Forwards and futures: the mechanics of trading, price determination, hedging strategies; Swaps: definition and valuation; Options: payoffs, arbitrage bounds, trading strategies, the binomial model, the Black-Scholes model and its relationship to the binomial, hedging, American options and dividends, options on futures, limitations of the binomial and Black-Scholes Models.
Intended learning outcomes
On successful completion of this subject students should be able to:
- Explain the role of derivatives exchanges and the characteristics of derivative securities;
- Explain the role of arbitrage as a basis for determining the prices of derivative securities;
- Explain the mechanics of trading futures contracts, forward contracts and options;
- Design and manipulate payoff diagrams for various derivative securities;
- Calculate option prices using the Black-Scholes and binomial models;
- Explain how derivative securities can be used in hedging;
- Reflect on the theoretical limitations of key derivatives pricing models and on practical difficulties that arise in their implementation.
Generic skills
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High level of development: problem solving; statistical reasoning; application of theory to practice; synthesis of data and other information; evaluation of data and other information.
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Moderate level of development: written communication; interpretation and analysis; critical thinking; use of computer software.
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Some level of development: oral communication; collaborative learning; team work; accessing data and other information from a range of sources.
Last updated: 22 March 2024
Eligibility and requirements
Prerequisites
One of:
Code | Name | Teaching period | Credit Points |
---|---|---|---|
FNCE20001 | Business Finance |
Summer Term (On Campus - Parkville)
Semester 1 (On Campus - Parkville)
|
12.5 |
FNCE20005 | Corporate Financial Decision Making |
Semester 1 (On Campus - Parkville)
Semester 2 (On Campus - Parkville)
|
12.5 |
AND
One of:
620-270 Applied Statistics
620-261 Introduction to Operations Research (2008 or earlier)
Code | Name | Teaching period | Credit Points |
---|---|---|---|
MAST20018 | Discrete Maths and Operations Research | Semester 2 (On Campus - Parkville) |
12.5 |
ECOM20001 | Econometrics 1 |
Semester 2 (On Campus - Parkville)
Semester 1 (On Campus - Parkville)
|
12.5 |
MAST20029 | Engineering Mathematics |
Summer Term (On Campus - Parkville)
Semester 2 (On Campus - Parkville)
Semester 1 (On Campus - Parkville)
|
12.5 |
MAST20004 | Probability | Semester 1 (On Campus - Parkville) |
12.5 |
MAST20006 | Probability for Statistics | Semester 1 (On Campus - Parkville) |
12.5 |
ECON20003 | Quantitative Methods 2 |
Semester 1 (On Campus - Parkville)
Summer Term (On Campus - Parkville)
Semester 2 (On Campus - Parkville)
|
12.5 |
MAST20005 | Statistics | Semester 2 (On Campus - Parkville) |
12.5 |
Corequisites
None
Non-allowed subjects
None
Recommended background knowledge
Please refer to Prerequisites and Corequisites.
Inherent requirements (core participation requirements)
The University of Melbourne is committed to providing students with reasonable adjustments to assessment and participation under the Disability Standards for Education (2005), and the Assessment and Results Policy (MPF1326). Students are expected to meet the core participation requirements for their course. These can be viewed under Entry and Participation Requirements for the course outlines in the Handbook.
Further details on how to seek academic adjustments can be found on the Student Equity and Disability Support website: http://services.unimelb.edu.au/student-equity/home
Last updated: 22 March 2024
Assessment
Additional details
- 3-hour end-of-semester examination (75%)
- A mid-semester examination between weeks 6 – 8 (25%)
- To pass this subject students must pass the end of semester examination.
Last updated: 22 March 2024
Dates & times
- Semester 1
Principal coordinator Neal Galpin Mode of delivery On Campus (Parkville) Contact hours Two 1-hour lectures and a 1-hour tutorial per week Total time commitment 170 hours Teaching period 26 February 2018 to 27 May 2018 Last self-enrol date 9 March 2018 Census date 31 March 2018 Last date to withdraw without fail 4 May 2018 Assessment period ends 22 June 2018 - Semester 2
Principal coordinator Federico Nardari Mode of delivery On Campus (Parkville) Contact hours Two 1-hour lectures and a 1-hour tutorial per week Total time commitment 170 hours Teaching period 23 July 2018 to 21 October 2018 Last self-enrol date 3 August 2018 Census date 31 August 2018 Last date to withdraw without fail 21 September 2018 Assessment period ends 16 November 2018
Time commitment details
170 hours
Last updated: 22 March 2024
Further information
- Texts
Prescribed texts
You will be advised of prescribed texts by your lecturer.
- Related Handbook entries
This subject contributes to the following:
Type Name Breadth Track Economics and Finance - Breadth options
This subject is available as breadth in the following courses:
- Available through the Community Access Program
About the Community Access Program (CAP)
This subject is available through the Community Access Program (also called Single Subject Studies) which allows you to enrol in single subjects offered by the University of Melbourne, without the commitment required to complete a whole degree.
Entry requirements including prerequisites may apply. Please refer to the CAP applications page for further information.
Last updated: 22 March 2024