| CODE | BKF5260 | |||||||||
| TITLE | Structured Investment Products | |||||||||
| UM LEVEL | 05 - Postgraduate Modular Diploma or Degree Course | |||||||||
| MQF LEVEL | 7 | |||||||||
| ECTS CREDITS | 5 | |||||||||
| DEPARTMENT | Banking and Finance | |||||||||
| DESCRIPTION | This study-unit will describe the main classes of structured investment products. The study-unit's program will focus on how structured products can be used to reach capital protection, or achieve yield enhancement or participation in any asset class. Then attention will be concentrated on the pricing and risk management issues of structured products. Week 1 Introduction: (Reading pack; Wilmott, Chapter 2, 9) - Historical background; - Time value for money Concept; - Equivalent Rate, Effective Rate & Continuously Compounded rate; - Future Value (FV), Present Value, rate of Discount and Discount Factor; - Zero-Coupon bond & Zero Coupon Yield; - American Vs European Options; - Exotic Options. Week 2 Overview Structured Products: (Reading pack; Blumke, Chapter 2) - Buyers, Sellers and Reasons for Investing in Structured Products; - Reading a Payoff Diagram; - Reading a Payoff Formula; - Reading a Term-Sheet. Week 3-4 Main Categories of Structured investment products: (Reading pack; Blumke, Chapter 3) - Capital Guaranteed Products; - Yield Enhancement; - Participation. Week 5-6 Structured Products During their Lifetime: (Distribution of Assignment; Reading pack; Blumke, Chapter 4 and Hull, Chapters 15, 17) - Main Valuation and Risk Measures; - Capital Guarantee; - Yield Enhancement; - Participation Products; - Other Participation Products. Week 7 More Exotic Options & Special Features: (Reading pack; Wilmott, Chapters 14; Hull, Chapters 19-20 and Blumke, Chapter 5) - Quanto Options; - Barrier Options; - Autocall and Callable Options; - Rolling Products and Products Without Fixed Maturity; - Conditional and Accumulating Coupons. Week 8 Functionality Options of Structured Products: (Reading pack; Blumke, Chapter 6) - Physical or Cash Delivery with Equity-Based Products; - Clean Price and Dirty Price; - Lending Values; - Issue Minimum/Maximum Size and Liquidity; - Funding Rates and Counterparty/Credit Risk. Week 9-10 Foreign Exchange, Fixed Income and Commodity Products: (Reading pack; Blumke, Chapter 7) - FX-Based Structures; - Fixed Income Structures; - Commodity Structures. Week 11 Recent Developments: (Reading pack; Blumke, Chapter 8) - Customized Index Products; - Electronic Trading Platforms; - Actively Managed Certificates. Week 12 Classical Theory and Structured Products: (Reading pack; Blumke, Chapter 10) - Distribution of Returns Shapes; - Classical Portfolio Management Theories; - Classical Theory and Structured Products. Week 13 Return Distributions of Structured Products: (Reading pack; Blumke, Chapter 12) - Procedure and Data; - Capital Guaranteed Products; - Yield Enhancement Products; - Participation Products; - Conclusion: Product Classification. Week 14 Structured Portfolio Construction: (Reading pack; Blumke, Chapter 13) - Portfolio Construction Process; - Constructing a Structured Product Portfolio in Theory; - Preferred Return Distribution Process Versus Classic Portfolio Management; - Investor Portfolios; - Conclusion. The computational Finance Sessions will be structured as follows: - An overview of computational finance; - Introduction to trading; - Analysing stock prices and returns; - Introduction to Stochastic Processes & Overview of Financial Time Series Models; - Implementing algorithmic trading strategies; - Assessment of trading algorithms and strategies; - The simulation of the trading process; - Material: Lecture notes + Interactive lab sessions and codes. Study-unit Aims: The aim of this study-unit focuses on how structured investment products can be used by investors to access a large variety of underlying and risk/return profiles. Also, what are the pricing and risk issues to consider when investing and trading structured products. This is achieved through the use of a combination of theoretical lessons and tutorials. Class work will involve lectures and pricing workshops. The computational finance part will introduce participants to the principles of financial markets modelling and introduce participants with no previous programming experience to the area of financial systems programming, as well as to the design and application of simple trading strategies. Learning Outcomes: 1. Knowledge & Understanding: At the end of this study-unit, participants will have a broad overview of the rationale underlying the use of structured products, how to break down structured products into their base building blocks and price them in the current financial markets. The computational Finance part will familiarise the students with the most common algorithmic trading strategies. 2. Skills: By the end of the study-unit the student will be able to: - Construct a structured investment product and be able to price structured investment products in the current financial markets. Furthermore the ability to assess the risk profile of these products and integrate them within portfolios; - Combine theoretical analysis in the wider context of problem solving and system design and use problem solving strategies to solve various financial trading problems. Main Text/s and any supplementary readings: Main Text: - Andreas Blumke, How to Invest in Structured Products, a Guide for Investors and Asset Managers, Wiley, 2009. - Paul Wilmott, Derivatives, The Theory and Practice of Financial Engineering, Wiley, 2000. - John Hull, Options, Futures and Other Derivatives, Sixth Edition, Prentice-Hall, 2006. A lecturer's reading pack will also be provided. Computational Finance: Main Text: - K. Kim (2007) Electronic and Algorithmic Trading Technology: The Complete Guide. Academic Press. Supplementary Text: - Brandimarte, P. (2002). Numerical Methods in Finance: A MATLAB-BasedIntroduction. John Wiley & Sons. - An Introduction to Matlab by David F. Griffiths. http://www.maths.dundee.ac.uk/~ftp/na-reports/MatlabNotes.pdf |
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| ADDITIONAL NOTES | Pre-requisite Study-unit: BKF4051 | |||||||||
| STUDY-UNIT TYPE | Lecture and Tutorial | |||||||||
| METHOD OF ASSESSMENT |
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| LECTURER/S | Mark Azzopardi |
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The University makes every effort to ensure that the published Courses Plans, Programmes of Study and Study-Unit information are complete and up-to-date at the time of publication. The University reserves the right to make changes in case errors are detected after publication.
The availability of optional units may be subject to timetabling constraints. Units not attracting a sufficient number of registrations may be withdrawn without notice. It should be noted that all the information in the description above applies to study-units available during the academic year 2025/6. It may be subject to change in subsequent years. |
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