FM441      Half Unit

This information is for the 2019/20 session.

Teacher responsible

Dr Rohit Rahi


This course is available on the Global MSc in Management, MSc in Accounting and Finance, MSc in Applicable Mathematics, MSc in Econometrics and Mathematical Economics, MSc in Financial Mathematics, MSc in Quantitative Methods for Risk Management, MSc in Risk and Finance, MSc in Statistics (Financial Statistics), MSc in Statistics (Financial Statistics) (LSE and Fudan) and MSc in Statistics (Financial Statistics) (Research). This course is available with permission as an outside option to students on other programmes where regulations permit.

Global MSc in Management ('Accounting and Finance' and 'Finance' concentrations only).


This is an advanced course. Students will be expected to have a good grasp of basic probability theory and multivariate calculus.

Course content

The course provides a thorough grounding in the theory of derivatives pricing and hedging. Both discrete-time and continuous-time models will be covered, including a comprehensive treatment of the Black-Scholes model. A special feature of the course is its emphasis on the modern theory of no-arbitrage pricing using martingale methods. These methods will be applied to the pricing of equity options, forwards, futures and interest rate derivatives. The uses of derivatives in hedging and risk-management will be discussed as well.


20 hours of lectures and 10 hours of seminars in the LT.

Formative coursework

Weekly problem sets in classes (10).

Indicative reading

Teaching notes will be distributed. No one book covers the entire course, but the following is an excellent reference: John C Hull, Options, Futures and Other Derivatives.


Exam (100%, duration: 2 hours) in the summer exam period.

Key facts

Department: Finance

Total students 2018/19: 111

Average class size 2018/19: 18

Controlled access 2018/19: No

Value: Half Unit

Guidelines for interpreting course guide information

Personal development skills

  • Problem solving
  • Application of numeracy skills
  • Commercial awareness
  • Specialist skills