Undergraduate Programme and Module Handbook 2010-2011 (archived)

Module ECOS3251: FINANCIAL ENGINEERING

Department: Economics, Finance and Business (Economics and Finance) [Queen's Campus, Stockton]

ECOS3251: FINANCIAL ENGINEERING

Type	Tied	Level	3	Credits	20	Availability	Available in 2010/11	Module Cap	None.	Location	Queen's Campus Stockton

Tied to	NN43
Tied to	N200
Tied to	N420

Prerequisites

Financial Markets and Risk Management (ECOS2141).

Corequisites

None.

Excluded Combination of Modules

None.

Aims

This module aims to introduce the theory and practice of Financial Engineering, highlighting concepts, products and strategies.

Content

Introduction to option contracts and stochastic calculus
Option properties
Derivation of Black and Scholes (1973) and the pricing of options written on different underlying assets
The Binomial Asset Pricing Model, American-style and exotic options
Corporate Securities with Option Characteristics & Real Options
Interest Rate Derivatives
Stock Index Futures
Currency Forwards and Futures
Swaps
Credit Risk
Estimating Volatility and Correlation
Value at Risk

Learning Outcomes

Subject-specific Knowledge:

By the end of the module students should:
be able to appreciate modern financial engineering and financial innovation.
understand the role, use and pricing of complex derivatives and the numerical techniques needed for derivative pricing.

Subject-specific Skills:

have practiced skills of problem solving and critical thinking.
have practiced numerical and analytical problem solving
acquired excel based option pricing and risk management applications

Key Skills:

Written Communication - through a summative examination.
Planning, Organisation and Time Management - e.g. by preparing for examinations.
Problem Solving and Analysis - e.g. by applying the necessary analytical and quantitative skills, as well as the ability to manipulate concepts in financial engineering, undertaking assessed work.
Initiative - e.g. searching relevant literature and information in preparation for exams
Numeracy - e.g. by applying core mathematical and statistical skills to answer a range of examination questions.
Computer Literacy - eg by applying derivative pricing techniques, value at risk analysis and volatility estimation in Microsoft Excel workshops.

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

Teaching is by lectures, seminars and workshops. Learning takes place through attendance at lectures, preparation for and participation in seminar classes, and private study. Formative assessment is by means of a piece of written work. Summative assessment is by means of a written examination.

Teaching Methods and Learning Hours

Activity	Number	Frequency	Duration	Total/Hours
Lectures	22	1 Per Week	1 Hour	22
Seminars	5	1 in term 1, 4 in term 2	1 Hour	5	■
Workshops	3	3 in term 1	1 hour	3	■
Preparation and Reading				170
Total				200

Summative Assessment

Component: Examination		Component Weighting: 100%
Element	Length / duration	Element Weighting	Resit Opportunity
One written examination	2 hours 15 mins	100%

Formative Assessment:

One piece of written work of up to 1500 words.

■ 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