| Unit name | Derivatives and International Finance |
|---|---|
| Unit code | ACFI30013 |
| Credit points | 20 |
| Level of study | H/6 |
| Teaching block(s) |
Teaching Block 2 (weeks 13 - 24) |
| Unit director | Dr. Quaye |
| Open unit status | Not open |
| Units you must take before you take this one (pre-requisite units) |
Pass in Principles of Finance (ACFI20001) OR Pass in Asset Markets (EFIM20043) |
| Units you must take alongside this one (co-requisite units) |
Financial Markets and Corporate Finance (ACFI30012) (not relevant for BSc Finance students) |
| Units you may not take alongside this one |
None |
| School/department | School of Accounting and Finance - Business School |
| Faculty | Faculty of Social Sciences and Law |
Why is this unit important?
Join this unit to explore the world of financial innovation in global financial markets and international corporations. Understand the technicalities of futures, forwards, options, and swaps, and discover how these powerful financial instruments drive risk management and investment strategies. The engaging curriculum will equip you with the knowledge and skills to successfully navigate the complexities of derivative markets by fusing theoretical underpinnings and practical applications. One key are of study will be the management of currency risk through a suitable employment of currency derivatives.
How does this unit fit into your programme of study?
The unit is offered as an elective to several finance-related programmes. Taking part in this unit will complement your core studies by additional in-depth exploration of an important class of financial instruments. One key area of application will be currency-related derivatives, and the analysis of these instruments will be embedded in the framework of arbitrage-based parity conditions for exchange rates. The elective will deepen your understanding of the role and nature of derivative instruments and of currency exchanges. More generally, the unit will deepen you understanding of the nature of financial risk and of managing risk.
An overview of content
This course focuses on derivatives and international finance, emphasizing fundamental tools in derivatives markets, their relevance in global finance, and risk management strategies. Exploring widely traded financial derivatives like futures, forwards, swaps, and options, the curriculum delves into their properties, pricing principles, and suitable applications in financial contracts. In the context of international finance, the unit examines parity conditions governing essential relationships among spot and forward exchange rates, interest rates, and inflation rates. In this context we study a range of currency related derivatives and learn how to use them to manage currency risk.
How will students personally be different as a result of the unit?
You will gain competence and confidence in your understanding of risk and how risk can be managed and controlled through trading in dedicated financial instruments.
Learning Outcomes
Develop competence and maturity in:
1. Describing the basic principles and terminology of derivative instruments, including futures, options, and swaps, as well as how contracts are traded and settled.
2. Explaining the mechanics of key factors that drive derivative pricing, such as underlying asset value, time to expiration, and market volatility.
3. Constructing and analysing the payoff structures, profit and loss, and risk exposure associated with various derivative strategies, including asset-liability management, hedging, speculation, and arbitrage.
4. Explaining currency exchanges in terms of parity conditions relating exchange rates to interest rates and inflation rates.
5. Evaluating and comparing different derivative contracts and strategies to make informed decisions, considering factors like risk management, leverage, and market conditions.
Weekly 2-hour lectures. In most weeks you will also attend an exercise class or a tutorial class (in smaller groups). You are given exercises in advance, these are discussed with your peers and your tutor in class, and full solutions are published after class.
Your total learning time for this unit is expected to be some 200 hours. This is made up of contact time, directed learning tasks, independent learning and assessment activity.
Tasks which help you learn and prepare you for summative tasks (formative):
Exercise classes and tutorials offer an opportunity to receive feedback from the tutor and from your peers. Written answers to exercises are published on Blackboard. You are offered a trial test that is similar to the exam and that allows you to practice answering the kind of question that you will see in the exam. Solutions to that test are discussed in one of the lectures.
Tasks which count towards your unit mark (summative):
20% CW (a 1,500 word individual essay), assessing parts of ILO1, ILO2 and ILO3
80% exam (2 hours), assessing ILO1, ILO2, ILO3, ILO4 and ILO5
When assessment does not go to plan
Any re-assessment required will be a like for like assessment.
If this unit has a Resource List, you will normally find a link to it in the Blackboard area for the unit. Sometimes there will be a separate link for each weekly topic.
If you are unable to access a list through Blackboard, you can also find it via the Resource Lists homepage. Search for the list by the unit name or code (e.g. ACFI30013).
How much time the unit requires
Each credit equates to 10 hours of total student input. For example a 20 credit unit will take you 200 hours
of study to complete. Your total learning time is made up of contact time, directed learning tasks,
independent learning and assessment activity.
See the University Workload statement relating to this unit for more information.
Assessment
The Board of Examiners will consider all cases where students have failed or not completed the assessments required for credit.
The Board considers each student's outcomes across all the units which contribute to each year's programme of study. For appropriate assessments, if you have self-certificated your absence, you will normally be required to complete it the next time it runs (for assessments at the end of TB1 and TB2 this is usually in the next re-assessment period).
The Board of Examiners will take into account any exceptional circumstances and operates
within the Regulations and Code of Practice for Taught Programmes.
