6 points, SCA Band 2, 0.125 EFTSL
Undergraduate - Unit
Refer to the specific census and withdrawal dates for the semester(s) in which this unit is offered.
- Second semester 2018 (On-campus)
AFF3751, BFF3751, AFC3340
This unit provides a more technical treatment of derivative analysis with focus on implementation issues. Topics include stochastic calculus concepts that underpin continuous time option pricing models, alternatives to the Black-Scholes-Merton model, numerical approaches to option pricing, valuation of interest rate derivatives, exotic options, credit derivatives, Value-at-Risk and estimation of volatilities.
The learning goals associated with this unit are to:
- develop an understanding of Wiener processes and Ito's Lemma as the basic building blocks for continuous time option pricing models. Derive the Black-Scholes-Merton differential equations
- apply models of option pricing beyond the Black-Scholes-Merton model
- apply numerical procedures to price options especially exotic options
- analyse interest rate derivatives and apply term structure models
- implement pricing models using technical programing languages.
- demonstrate how risk can be quantified using different approaches
- analyse and value swaps, credit default swaps and other derivatives and demonstrate how they can be used for risk management and speculation
- apply critical thinking, problem solving and presentation skills to individual and/or group activities dealing with derivative instruments and demonstrate in an individual summative assessment task the acquisition of a comprehensive understanding of the topics covered by BFC3340.
Within semester assessment: 40% + Examination: 60%
Minimum total expected workload to achieve the learning outcomes for this unit is 144 hours per semester typically comprising a mixture of scheduled learning activities and independent study. Independent study may include associated readings, assessment and preparation for scheduled activities. The unit requires on average three/four hours of scheduled activities per week. Scheduled activities may include a combination of teacher directed learning, peer directed learning and online engagement.
See also Unit timetable information