IC317-Derivative Securities

Module Provider: ICMA Centre
Number of credits: 20 [10 ECTS credits]
Terms in which taught: Autumn term module
Pre-requisites: IC102 Introductory Finance/Trading Simulation I
Non-modular pre-requisites:
Modules excluded:
Current from: 2022/3

Module Convenor: Dr Yueting Cui
Email: y.cui@icmacentre.ac.uk

Type of module:

Summary module description:

From the 1970s to the present, derivatives markets are developing rapidly in terms of their market size and importance to the majority of market participants. Banks, corporations, governments and multi-national institutions utilize derivatives products either simple or complex ones to hedge risk and exploit opportunities. To understand the modern financial market and its practical applications, it’s inevitable to study derivatives. This module is an introduction to derivatives markets and instruments. We explore derivatives markets and their products mainly through theories and practical trading strategies. By the end of this module, you will be equipped with the essential knowledge to continue studying the advanced derivatives pricing model and practising trading with derivatives in your later module.


This module is an introduction to derivatives markets and their products. It will include an overview of the main derivative markets and an introduction to major derivatives securities. By the end of this module, students should be able to demonstrate, compare and contrast the features of futures, options and swaps. Apply and interpret derivatives pricing models. Employ the theory of financial derivatives to practical issues in risk management.

Assessable learning outcomes:

  • Describe and discuss the role and functions of derivative markets within the financial system.

  • Compare and contrast the key features of the major derivative instruments.

  • Develop appropriate trading or hedging strategies.

  • Explain the principles of derivatives pricing and conduct the basic calculations.

  • Apply an appropriate pricing model to a variety of derivative securities.

  • Identify and criticise theapplication of derivatives in risk management.


Additional outcomes:

Using appropriate Excel functions to calculate p/l, apply basic pricing models and draw graphs for forwards, futures, and options.

Interpreting the features, pricing, as well as trading strategies of relevant derivatives with appropriate analytical skills.

Outline content:

Topic 1: A brief of derivatives markets 

Topic 2: An introduction of forwards and futures markets 

Topic 3: Forwards and futures pricing and hedging strategies 

Topic 4: An introduction of options markets and options’ properties

Topic 5: Combining instruments and trading strategies

Topic 6: The basics of options pricing 

Topic 7: Greeks

Topic 8: An introduction of Swaps

Topic 9: Other financial derivatives

Brief description of teaching and learning methods:

A combination of lectures and seminars. During the seminars, students are guided through the solutions to the relevant pricing, hedging, and trading strategies exercises.

Contact hours:
  Autumn Spring Summer
Lectures 20
Seminars 10
Guided independent study:      
    Wider reading (independent) 55
    Exam revision/preparation 70
    Preparation for seminars 35
    Reflection 10
Total hours by term 200 0 0
Total hours for module 200

Summative Assessment Methods:
Method Percentage
Written exam 80
Class test administered by School 20

Summative assessment- Examinations:

1.5 hour unseen written paper

The examination for this module will require a narrowly defined time window and is likely to be held in a dedicated exam venue.

Summative assessment- Coursework and in-class tests:

1.5 hour class test –multiple choice test (week 8 – 9 in the autumn term)

Formative assessment methods:

Penalties for late submission:

The Support Centres will apply the following penalties for work submitted late:

  • where the piece of work is submitted after the original deadline (or any formally agreed extension to the deadline): 10% of the total marks available for that piece of work will be deducted from the mark for each working day (or part thereof) following the deadline up to a total of five working days;
  • where the piece of work is submitted more than five working days after the original deadline (or any formally agreed extension to the deadline): a mark of zero will be recorded.
The University policy statement on penalties for late submission can be found at: https://www.reading.ac.uk/cqsd/-/media/project/functions/cqsd/documents/cqsd-old-site-documents/penaltiesforlatesubmission.pdf
You are strongly advised to ensure that coursework is submitted by the relevant deadline. You should note that it is advisable to submit work in an unfinished state rather than to fail to submit any work.

Assessment requirements for a pass:

Minimum mark of 40%

Reassessment arrangements:

Additional Costs (specified where applicable):

Required text books: £30-£55

Last updated: 22 September 2022


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