Interest Rate Derivatives

BMAN63012 Interest Rate Derivatives 15 Semester 2 Postgraduate Taught Level 7 Ser-Huang Poon Unit coordinator 1 FHEQ level (Framework for Higher Education Qualifications) ' Masters/Integrated Masters P4 ' European Credit Transfer & Accumulation System Rating : 7.5 This course provides students with the foundations of interest rate concepts and models for the purpose of pricing interest rate derivatives. It covers both single- and multi-period interest rate instruments and term structure models that are based on spot and forward rates. A number of well- known models (e.g. Vasicek, Hull- White,and Market Model ) will be studied. In addition, it will cover market risks, VaR (Value at Risk), counterparty credit risk, and how such risks may impact on the pricing and risk management of interest rate derivatives.  This course provides students with the foundations of interest rate concepts and models for the purpose of pricing interest rate derivatives. It covers both single- and multi-period interest rate instruments and term structure models that are based on spot and forward rates. A number of well- known models (e.g. Vasicek, Hull- White,and Market Model ) will be studied. In addition, it will cover market risks, VaR (Value at Risk), counterparty credit risk, and how such risks may impact on the pricing and risk management of interest rate derivatives.  This course gives students the foundations of interest rate concepts and models for pricing interest rate derivatives. It covers both single- and multi-period interest rate instruments and term structure models based on spot and forward rate. Several well-known models (e.g. Vasicek, Hull-White and Market Model) will be studied. The course also covers counterparty credit risk and market risk, and examine how such risks may impact on the pricing and risk management of interest rate derivatives. On completion of this unit successful students will have achieved the following learning outcomes:•  Appreciate the differences between the various types of interest rates, and the theories driving the shapes of the term structure and interest rate models. •  Have a broad knowledge of the simpler single period and more complex multiperiod interest rate contracts. •  Understand the different approaches to modeling interest rates, their different assumptions and the principle of valuation by no arbitrage. •  Have a detailed knowledge of the key spot rate models, the fundamentals of forward rates and  Forward Rate Market Model as the most important special case. •  Gain an appreciation of the nature of market risks & credit risks and examine how such risks affect the price and risk management procedures of interest rate derivatives.The methods of assessment for this unit allow students to demonstrate achievement of all intended learning outcomes.  Many students find these key skills essential for job placements in the finance industry. The financial risk management concepts and practice introduced here will form a good foundation for Bank’s CBES (climate scenario analysis exercise) and stressed tests, an essential part of the global response to climate change.   0 Other 100% Midterm Test (30%)Examination (70%)  •  Informal advice and discussion during lectures, seminars, and workshops. •  Online exercises and quizzes delivered through the Blackboard course space. (during workshop time, and through discussion board) •  Responses to student emails and questions from a member of staff including feedback provided to a group via an online discussion forum. •  Written and/or verbal comments on assessed or non-assessed coursework. •  Written and/or verbal comments after students have given a group or individual presentation. •  Generic feedback posted on Blackboard regarding overall examination performance. BMAN63012 Programme Req: BMAN63012 is only available as a core unit to students on MSc Quantitative FinanceNone (However, knowledge of basic derivatives is assumed, e.g. call, put, Black-Scholes etc.) N Poon, Stapleton and Subrahmanyam (2022) "Pricing and Hedging Interest rate derivatives", Manuscript, Manchester University and New York University (available on Blackboard).Key References: Hull J.C. (2021), Options, Futures and Other Derivatives: Global edition, 11/E, ISBN-10: 1292410655, ISBN-13: 978-1292410654, Pearson Higher Education.Gregory Jon K. (2012) "Counterparty Risk: The New Challenge for Global Financial Markets, John Wiley and Sons, 2nd ed.   Lectures 30 0 117.5 Informal Contact MethodsOffice hoursOnline Learning Activities (blogs, discussions, self assessment questions)Peer Assisted Study Sessions (group assignment, group based workshop exercises)Drop in Surgeries (extra help sessions for students on material they may be struggling with)Face-to-face discussion of sample assignment(s)