AF5038 - Derivatives and Risk

What will I learn on this module?

On this module you will be introduced to complex financial instruments, derivatives. You will learn about the features of derivatives, the risks they are often designed to manage or speculate upon and the ways that money flows ‘through’ the transactions they create. You will learn how to calculate profits and losses resulting from transactions involving derivatives. The module specifically introduces you to Futures, Forwards, Options, and Swaps, as well as examples of exotic derivative types (such as carbon derivatives).

In respect of each type of derivative, you will learn trading strategies specific to each, across three distinct approaches (hedging, arbitraging, speculating). You will study the factors that determine the performance of these trading strategies and how derivatives transform financial and non-financial risks. You will also learn how to apply various valuation techniques to derivatives. You will learn about these instruments and contextualise your knowledge using practical tasks and real-time data extracted from financial trading software.

How will I learn on this module?

You will learn through lectures (24 hours), financial trading software and Microsoft Excel based workshops (24 hours), as well as tutor led (76 hours) and independent study (76 hours). The workshops are designed to help you learn about these financial instruments in a practical way. You will apply your knowledge by answering exam-style questions throughout the semester to provide formative feedback of your progress on a week-by-week basis.

The formal teaching is supplemented using the electronic learning platform to provide:
• Additional reading materials to contextualise the subject content, including news, case study materials and academic journal articles.
• Video and PowerPoint presentations to supplement your independent study.
• Excel spreadsheets taken from the workshops.
• Exam practice materials.

Your assessment will require you to develop, justify, monitor, and reflect on a short-term speculative option trading strategy for an equity option. This comprises forecasting the underlying share price, creating a derivatives strategy consistent with the forecast, and analysing the ultimate financial performance of your strategy, therefore integrating theoretical aspects of finance regarding stock markets and derivatives markets in a practice-inspired context.

How will I be supported academically on this module?

You will be supported by a teaching and learning plan (TLP) that outlines the pattern and content of formal sessions. You will be supported by your tutors during interactive lectures and workshops where they will provide you with formative feedback. Lectures will be recorded and uploaded to the e-learning portal to consolidate your knowledge and develop understanding. Your electronic reading list references core material to support your lectures/workshops. It includes a comprehensive range of professional and academic journal articles relevant to your studies. Additionally, tutors will respond to questions using the University’s eLearning Portal so that the whole group can benefit. Weekly drop-in sessions in the NBS Trading Room will be arranged by your tutors so you can benefit from a chance to meet your tutor and ask them questions in a more informal environment.

What will I be expected to read on this module?

All modules at Northumbria include a range of reading materials that students are expected to engage with. The reading list for this module can be found at:
(Reading List service online guide for academic staff this containing contact details for the Reading List team –

What will I be expected to achieve?

Knowledge & Understanding (KU):
• Understand and apply knowledge of derivatives products, specifically in terms of the way that they work and their effect on risks (MLO1).
• Apply Excel-based spreadsheets to the operation of financial products in the development of appropriate financial solutions (MLO2).

Intellectual / Professional skills & abilities (IPSA):
• Conduct investigations of derivative products by proposing an investment and monitoring and reflecting on its performance over time (MLO3).

How will I be assessed?

Formative assessment:
This will take place through interactive workshops where you will be formatively assessed by your tutor. You will have a chance to complete and receive feedback on practice exercises made available through the elp blackboard site. You should be aware that formative feedback can and will occur in any communication with your academic tutor.

Summative Assessment:
The module is assessed by two elements:
1. An assessment which will be an individual piece of work of 2,000 words requiring you to investigate a derivative product in order to demonstrate MLO2 and MLO3 (60%)
2. A closed-book multiple choice exam that covers the whole of the syllabus to address MLO1. You will be given one hour to answer 20 questions (40%).





Module abstract

The world of complex financial instruments can appear confusing. We pick apart some of those used to examine the problems they’ve been designed to solve, the additional risks they create, how they’re priced and what ultimately impacts the profit or loss of a derivatives transaction. This module builds understanding of the more complex elements of the financial market, demonstrating the way that fortunes can be quickly made or lost. Lectures are research-led and practice informed and the assessment will require you to exercise your research skills using the NBS Trading Room. There you’ll examine an underlying exposure, propose a derivatives transaction, monitor its performance and reflect upon your approach and results to learn lessons and build knowledge. Through workshops you’ll learn about derivatives in an applied way using relevant case studies and financial data. The module builds a theoretical and practical foundation for career-relevant skills in risk management and investment management.

Course info

UCAS Code N395

Credits 20

Level of Study Undergraduate

Mode of Study 3 years Full Time or 4 years with a placement (sandwich)/study abroad

Department Newcastle Business School

Location City Campus, Northumbria University

City Newcastle

Start September 2024 or September 2025

Fee Information

Module Information

All information is accurate at the time of sharing. 

Full time Courses are primarily delivered via on-campus face to face learning but could include elements of online learning. Most courses run as planned and as promoted on our website and via our marketing materials, but if there are any substantial changes (as determined by the Competition and Markets Authority) to a course or there is the potential that course may be withdrawn, we will notify all affected applicants as soon as possible with advice and guidance regarding their options. It is also important to be aware that optional modules listed on course pages may be subject to change depending on uptake numbers each year.  

Contact time is subject to increase or decrease in line with possible restrictions imposed by the government or the University in the interest of maintaining the health and safety and wellbeing of students, staff, and visitors if this is deemed necessary in future.


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