Postgraduate Course: Financial Models and Derivatives in a Legal Context (LAWS11228)
Course Outline
| School | School of Law |
College | College of Humanities and Social Science |
| Credit level (Normal year taken) | SCQF Level 11 (Postgraduate) |
Availability | Available to all students |
| SCQF Credits | 40 |
ECTS Credits | 20 |
| Summary | The goal of this course is to introduce law students to basic concepts in finance. It focuses on an analysis of &«derivative&ª instruments, how to use them in different economic situations, and the benefits/consequences of helping clients set up contracts employing them when investing or conducting business, both locally and globally. The instruments are analyzed from two separate points of view: speculative and hedging. Tools and basic models that help in understanding the appropriate usage of different derivatives in different situations will also be introduced and examined. Through the course analysis, students will develop a thorough understanding of the models that influence and eventually determine the relationships among different derivative instruments. Cases are used to analyse actual situations and explore different possible solutions using derivatives, determining the best choice for the particular risk exposure in the case. The course will be taught on the assumption that the students have no prior knowledge of these financial instruments. The first part of the course introduces the student to basic understanding of financial models. This knowledge forms the basis of analysis for the derivatives concept and it is an integral part of the course. Thereafter, the legal context is explored in detail. |
| Course description |
It is proposed that this optional LLM course will be tied to the Commercial Law LLM Programme. It will be delivered by Ms Dorit Samuel, a visiting Professor at Albany Law School in the USA who will be based here in Edinburgh from August 2010. Ms Samuel has run this course at various US law schools over the past eight years and it is has been very popular with law students. Law schools have been slow to understand the need both to teach law students basic principles of finance in order to prepare them for the work they might be faced with and to appreciate the peculiar benefits in having the material taught by a person trained in finance who also understands the legal context. On the other hand, law firms have been very impressed with the prospect of hiring law students that understand the underpinnings of the world of derivatives and financial modelling. This awareness, of course, has been heightened by the major financial havoc wrought by these sophisticated financial instruments; at the same time there has been an increasing understanding of the need to have both the lawyers who create financial transactions and those who supervise and police the system have a real, working understanding of what exactly creates the problem.
Introduction-The concept of time value of money, Theory of Agency, HBR 9-173-003 Present Value vs IRR
Net Present Value project evaluation versus Internal Rate of Return, Comparative evaluation and proforma analysis of projects
CAPM- Capital Asset Pricing Model - &«risk and return&ª HBR 9-276-183 The Capital Asset Pricing Model
The Arbitrage Pricing Theory Model$ûbasic understanding of arbitrage and how it drives pricing and hedging decisions
Introduction to options - Payoff diagrams of options and their use in hedging/speculation HBR 9-295-141 Introduction to Derivative Instruments
Black-Scholes Option pricing model: how to price an option. Evaluating variations of the model (i.e. foreign exchange pricing)
Put Call Parity Theorem and its application to Options
Introduction to Futures and Forwards contracts
Exploring the use of Futures and Forwards
Introduction to Swaps contracts-HBR Currency Swaps 9-286-073
Exploring the use of Swaps. Review of cases.
Cases: Analysis, Presentation and Discussion
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Entry Requirements (not applicable to Visiting Students)
| Pre-requisites |
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Co-requisites | |
| Prohibited Combinations | |
Other requirements | None |
| Additional Costs | 0 |
Information for Visiting Students
| Pre-requisites | None |
Course Delivery Information
| Not being delivered |
Learning Outcomes
From the course, the students should develop proficiency in financial information systems usage, become competent to engage in financial analysis using derivatives, understand the contractual binding system supporting the derivatives, and be able to deal effectively and efficiently with:
Asset pricing (risk-return) models evaluation;
Risk evaluation and determination of appropriate derivatives to hedge risk;
Foreign currency evaluation and its relationship to derivatives;
Option pricing using the BSOPM;
Researching economic data relating to derivatives by means of the Internet;
Analyzing and professionally presenting optimal choice hedging in specific cases.
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Additional Information
| Graduate Attributes and Skills |
Not entered |
| Study Abroad |
None |
| Keywords | Financial Law - Financial Derivatives |
Contacts
| Course organiser | Dr Gillian Black
Tel: (0131 6)50 9541
Email: |
Course secretary | Miss Amanda Mackenzie
Tel: (0131 6)51 3211
Email: |
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