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This unit builds on the Level 2 unit FINA2204 Derivative Products and Markets to study the kinds of derivatives used in practice, the principles of pricing them, and their applications in the modern financial world. The unit develops the theoretical frameworks, financial, probabilistic and statistical, essential to understanding modern practices in derivative pricing and applications such as portfolio insurance, dynamic hedging and risk management. The Black-Scholes-Merton framework and risk-neutral valuation are explored. The unit also looks at the role derivatives have played in financial crises.
- 6 points
Availability Location Mode Not available in 2024 UWA (Perth) Face to face
- Details for undergraduate courses
- Level 3 option in the Finance major sequence
- Level 3 elective
Students are able to (1) demonstrate how to value a variety of derivative contracts and strategies; (2) identify potential arbitrage opportunities and utilise these to price derivatives; (3) understand the Black-Scholes-Merton option pricing framework, its assumptions, derivation and implications; (4) explore volatility structures (such as smiles and smirks) and their relation to theoretical pricing models; (5) use industry relevant tools (such as spreadsheets and financial information systems) to access, process and calculate derivative prices; (6) explain the risks embedded in financial derivatives and how they have contributed to past financial crises; and (7) demonstrate the ability to give oral presentations that are clear and coherent.
Indicative assessments in this unit are as follows: (1) tutorial presentations; (2) assignments; and (3) examination. Further information is available in the unit outline.
Student may be offered supplementary assessment in this unit if they meet the eligibility criteria.
- Unit rules
- Contact hours
- lectures/tutorials/seminars/workshops: up to 3 hours per week
- The availability of units in Semester 1, 2, etc. was correct at the time of publication but may be subject to change.
- All students are responsible for identifying when they need assistance to improve their academic learning, research, English language and numeracy skills; seeking out the services and resources available to help them; and applying what they learn. Students are encouraged to register for free online support through GETSmart; to help themselves to the extensive range of resources on UWA's STUDYSmarter website; and to participate in WRITESmart and (ma+hs)Smart drop-ins and workshops.
- Unit readings, including any essential textbooks, are listed in the unit outline for each unit, one week prior the commencement of study. The unit outline will be available via the LMS and the UWA Handbook one week prior the commencement of study. Reading lists and essential textbooks are subject to change each semester. Information on essential textbooks will also be made available on the Essential Textbooks. This website is updated regularly in the lead up to semester so content may change. It is recommended that students purchase essential textbooks for convenience due to the frequency with which they will be required during the unit. A limited number of textbooks will be made available from the Library in print and will also be made available online wherever possible. Essential textbooks can be purchased from the commercial vendors to secure the best deal. The Student Guild can provide assistance on where to purchase books if required. Books can be purchased second hand at the Guild Secondhand bookshop (second floor, Guild Village), which is located on campus.
- Contact hours provide an indication of the type and extent of in-class activities this unit may contain. The total amount of student work (including contact hours, assessment time, and self-study) will approximate 150 hours per 6 credit points.
Face to face
Predominantly face-to-face. On campus attendance required to complete this unit. May have accompanying resources online.
100% Online Unit. NO campus face-to-face attendance is required to complete this unit. All study requirements are online only. Unit is asynchronous delivery, with NO requirement for students to participate online at specific times.
100% Online Unit. NO campus face-to-face attendance is required to complete this unit. All study requirements are online only. Unit includes some synchronous components, with a requirement for students to participate online at specific times.
Not available for self-enrolment. Students access this mode by contacting their student office through AskUWA. 100% Online Unit.
NO campus face-to-face attendance. All study and assessment requirements are online only. Unit includes some timetabled activities, with a requirement for students to participate online at specific times. In exceptional cases (noted in the Handbook) students may be required to participate in face-to-face laboratory classes when a return to UWA’s Crawley campus becomes possible in order to be awarded a final grade.
No attendance or regular contact is required, and all study requirements are completed either via correspondence and/or online submission.
Regular attendance is not required, but student attends the institution face to face on an agreed schedule for purposes of supervision and/or instruction.
Multiple modes of delivery. Unit includes a mix of online and on-campus study requirements. On campus attendance for some activities is required to complete this unit.