FM408E      Half Unit
Financial Engineering

This information is for the 2019/20 session.

Teacher responsible

Dr Jean-Pierre Zigrand

Availability

This course is available on the MSc in Finance (part-time). This course is not available as an outside option.

Pre-requisites

Students must have completed FM422E and FM423E.

Students will be expected to show some familiarity with calculus (including stochastic calculus) and statistics

Course content

This course provides a thorough grounding in the theory and practice of financial engineering. The emphasis is on the application of derivatives pricing and hedging methodology to equity and volatility derivatives and to structured products. The course aims to cover the basics in derivatives theory, and to apply them to a multitude of financial securities and structured products, with a special emphasis on recent products in the equity and volatility derivative worlds. We review selected case studies in order to gain a better understanding of their practical usage. We also implement the models numerically in R and VBA.

Teaching

30 hours of lectures in the LT.

This course is taught in the interactive lecturing format. There is no distinction between lectures and classes/seminars; there are “sessions” only, and the pedagogical approach in each session is interactive.

Indicative reading

Based on a set of extensive lecture notes. No one book covers the material of the entire course. Books recommended include The Volatility Surface: A Practitioner's Guide, 2nd Edition, by Jim Gatheral, and The Volatility Smile by Derman, Miller and Parlk. Background reading can be found in Volatility: Practical Options Theory by Adam Iqbal, Derivatives Markets by Robert McDonald or Options, Futures and Other Derivatives by John Hull.

Assessment

Exam (70%, duration: 2 hours) in the summer exam period.
Project (30%) in the LT.

Key facts

Department: Finance

Total students 2018/19: 7

Average class size 2018/19: 15

Controlled access 2018/19: No

Value: Half Unit

Guidelines for interpreting course guide information

Personal development skills

  • Team working
  • Problem solving
  • Application of information skills
  • Communication
  • Application of numeracy skills
  • Commercial awareness
  • Specialist skills