Financial Instruments (ECFS867)

This unit covers the structure, pricing and usage of various financial instruments, including spot, forward, swaps and option contracts for equity, debt, foreign exchange and commodity markets. This unit is concerned with understanding how these financial instruments work, how they are used by end users for speculation and risk management, how they are priced and valued, and how market makers manage their risks when they trade these financial instruments.

Learning Outcomes:

  1. Explain and assess the characteristics and uses of various financial instruments such as forwards, futures, swaps, and options.
  2. Analyse financial risks and develop appropriate hedging strategies to manage those risks.
  3. Explain and assess the key concepts and models used to price and value financial instruments.
  4. Construct replicating portfolios for financial instruments and evaluate the importance of the replicating portfolio concept.
  5. Demonstrate the ability to price and value financial instruments.
  6. Conduct independent research to specialised issues in applied finance

Topics:

  1. Introduction to Financial Instruments
  2. Financial Risk Management
  3. Financial and Commodity Forwards and Futures
  4. Option Pricing 1: Option Relationships and the Binomial Option Pricing Model
  5. Option Pricing 2: Black-Scholes Option Pricing Model
  6. Interest Rate Forwards and Futures
  7. Swaps

Prerequisite Units:

Lecturers:

Unit Guides:

  • Financial Instruments - Sydney and Melbourne. The link will provide a list of guides for this unit. If the desired term/location is not listed, please view the latest one available.
  • Financial Instruments - Beijing.

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