Advanced Derivative Securities (FNCE40009)

HonoursPoints: 12.5On Campus (Parkville)

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Overview

Availability
Semester 2
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Arbitrage bounds, stock price dynamics, geometric Brownian motion and Itos Lemma, Cox-Ross-Rubinstein binomial model, Black-Scholes model, risk neutral valuation, forwards and futures, currency, stock index, futures and exotic options, Interest rate derivative securities.

Intended learning outcomes

On successful completion of this subject students should be able to:

  • Explain the role of arbitrage as a basis for determining the prices of financial securities;
  • Compare the various dynamics of stock price and interest rate models;
  • Explain the derivation of key option pricing models including the Cox-Ross-Rubinstein Binomial model and the Black-Scholes model;
  • Analyse the use of arbitrage pricing techniques to value other classes of derivative securities including forwards, futures, swaps and interest rate derivatives;
  • Analyse the theoretical limitations of key pricing models and on practical difficulties which arise in their implementation.

Generic skills

On successful completion of this subject, students should have improved the following generic skills:

  • Oral communication
  • Written communication
  • Collaborative learning
  • Problem solving
  • Team work
  • Statistical reasoning
  • Application of theory to practice
  • Interpretation and analysis
  • Critical thinking
  • Synthesis of data and other information
  • Evaluation of data and other information
  • Using computer software

Last updated: 4 March 2025

Eligibility and requirements

Prerequisites

Admission into the BH-COM Bachelor of Commerce (Degree with Honours)

AND

Code Name Teaching period Credit Points
FNCE30007 Derivative Securities
Semester 2 (On Campus - Parkville)
Semester 1 (On Campus - Parkville)
 12.5

Corequisites

None

Non-allowed subjects

Students who complete this subject cannot also gain credit for

Code Name Teaching period Credit Points
ACTL40004 Advanced Financial Mathematics
Semester 1 (On Campus - Parkville)
 12.5

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: 4 March 2025

Assessment

DescriptionTimingPercentage

Group assignment 1 (groups of 3-4 students)

  • 1500 words (total)
From Week 6 to Week 815%

Group assignment 1 (groups of 3-4 students)

  • 1500 words (total)
From Week 9 to Week 1115%

End-of-semester examination

  • 3 hours
During the examination period70%

Last updated: 4 March 2025

Dates & times

  • Semester 2
    Principal coordinatorThijs van der Heijden
    Mode of deliveryOn Campus (Parkville)
    Contact hoursThree hours of lectures and seminars per week
    Total time commitment120 hours
    Teaching period28 July 2025 to 26 October 2025
    Last self-enrol date 8 August 2025
    Census date 1 September 2025
    Last date to withdraw without fail26 September 2025
    Assessment period ends21 November 2025

    Semester 2 contact information

    Thijs van der Heijden: thijs.vanderheijden@unimelb.edu.au

Time commitment details

120 hours

What do these dates mean

Visit this webpage to find out about these key dates, including how they impact on:

  • Your tuition fees, academic transcript and statements.
  • And for Commonwealth Supported students, your:
       -  Student Learning Entitlement. This applies to all students enrolled in a Commonwealth Supported Place (CSP).
     

    Subjects withdrawn after the census date (including up to the ‘last day to withdraw without fail’) count toward the Student Learning Entitlement.

Last updated: 4 March 2025

Further information

  • Texts

    Prescribed texts

    There are no specifically prescribed or recommended texts for this subject.

Last updated: 4 March 2025