Durham University
Programme and Module Handbook

Postgraduate Programme and Module Handbook 2007-2008 (archived)


Department: Economics, Finance and Business (Economics and Finance)


Type Tied Level 4 Credits 15 Availability Available in 2007/08
Tied to L1K209
Tied to L1K309
Tied to L1K709
Tied to L1K809
Tied to L1K609
Tied to L1K509
Tied to L1K109


  • None


  • None

Excluded Combination of Modules

  • None


  • develop students' ability to master the knowledge and understanding at an advanced level of the nature and uses of financial derivatives;
  • provide students with the opportunity to develop the ability to critically understand academic literature relating to derivative financial instruments;
  • provide students with the ability to critically review this specialised complex area of knowledge with a view to undertaking the study of risk management and a dissertation in the field of financial engineering.


  • Introduction to Derivative Markets;
  • Forward Contracts;
  • Futures Contracts;
  • Fixed Income Theory;
  • Swaps;
  • Stock Index Arbitrage and Spread Trading;
  • Option Contracts and Stochastic Calculus;
  • Option Pricing Models;
  • Interest Rate Derivatives.

Learning Outcomes

Subject-specific Knowledge:
  • have an advanced knowledge and critical understanding of the main derivative financial instruments, their uses and their differences;
  • have a critical understanding of the roles of arbitrage, speculation and hedging derivative financial markets, including the complexity and interactions inherent in these roles;
  • have explored, understood and appreciated the complexity and contradictions of the current relevant academic literature and its implications for professional practice, and be able to identify open questions for their own research.
Subject-specific Skills:
  • be able to use highly specialised and advanced technical and academic skills to analyse the pricing of different derivative instruments;
  • be able to learn and work independently in the area of derivative markets, exercising critical judgement and discrimination in the resolution of complex problematic situations;
  • be able to apply problem solving and analytical skills to issues in derivative markets.
Key Skills:
  • Written Communication;
  • Planning, Organising and Time Management;
  • Problem Solving and Analysis;
  • Using Initiative;
  • Numeracy;
  • Computer Literacy.

Modes of Teaching, Learning and Assessment and how these contribute to the learning outcomes of the module

  • A combination of lectures, seminars and guided reading will contribute to achieving the aims and learning outcomes of this module. The summative written examination will test students' knowledge and critical understanding of the material covered in the module, their analytical and problem-solving skills.

Teaching Methods and Learning Hours

Activity Number Frequency Duration Total/Hours
Lectures 9 1 per week 2 hours 18
Seminars 4 1 hour 4
Preparation & Reading 126
Revision Sessions 2 1 hour 2
Total 150

Summative Assessment

Component: Examination Component Weighting: 100%
Element Length / duration Element Weighting Resit Opportunity
Unseen written examination 2 hours 100%

Formative Assessment:

Students will receive written comments on a formative written assignment. Additional formative assessment, and feedback, may take a number of forms such as oral feedback on work prepared by students for seminars; answers to questions either discussed during a seminar or posted on DUO; discussions with teaching staff during consultation hours, or via e-mail.

Attendance at all activities marked with this symbol will be monitored. Students who fail to attend these activities, or to complete the summative or formative assessment specified above, will be subject to the procedures defined in the University's General Regulation V, and may be required to leave the University