Durham University
Programme and Module Handbook

Postgraduate Programme and Module Handbook 2023-2024 (archived)

Module FINN40715: Derivative Markets

Department: Finance

FINN40715: Derivative Markets

Type Tied Level 4 Credits 15 Availability Available in 2023/24 Module Cap None.
Tied to L1K209
Tied to L1K309
Tied to L1K709
Tied to L1K809
Tied to L1K609
Tied to L1K509
Tied to L1K109
Tied to N3K109
Tied to N3K209
Tied to N3K309
Tied to N3K409
Tied to N3K509
Tied to N3K609
Tied to N3K709
Tied to N3K809


  • None.


  • Advanced Financial Theory (FINN40515)

Excluded Combination of Modules

  • None


  • To develop students' ability to master the knowledge and understanding at an advanced level of the nature and uses of financial derivatives;
  • To provide students with the ability to critically review this specialised complex area of knowledge with a view to undertaking the study of risk management.


  • Introduction to Derivative Markets;
  • Forwards and Futures Markets and Pricing;
  • Bonds and Swaps Pricing;
  • Option Markets and Properties;
  • Binomial Tree Option Pricing Model;
  • Stochastic Calculus;
  • Black-Scholes-Merton Option Pricing Model;
  • Exotic Options.

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 ethics and sustainability issues as well as 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 such as forwards, futures, swaps, and other financial options, and to be able to apprehend issues related to fixed income theory, stochastic calculus, the Black-Scholes option pricing model, stock index arbitrage and trading strategies;
  • 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 multiple-choice test allows for an assessment of the entire range of topics covered in the module.
  • The assignment is focused on assessing critical thinking as well as the analytical and problem-solving skills of students.

Teaching Methods and Learning Hours

Activity Number Frequency Duration Total/Hours
Lectures 10 1 per week 2 hours 20
Seminars 4 1 hour 4
Preparation and Reading 126
Total 150

Summative Assessment

Component: Multiple Choice Test Component Weighting: 40%
Element Length / duration Element Weighting Resit Opportunity
Multiple Choice Test 1 hour 100% same
Component: Assignment Component Weighting: 60%
Element Length / duration Element Weighting Resit Opportunity
Assignment 1500 words (max) 100% same

Formative Assessment:

Formative assessment is in the form of weekly multiple-choice tests and online assignments. 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 Learn Ultra.

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