My favourite Semester 1 module
It is fair to say that MSc Banking & Finance has been a challenging yet interesting course so far! Personally, the highlight for me so far has been the Financial Derivatives module, not just for the content but also the assignment. Yes, believe it or not, assignments can be interesting and fun sometimes!
What the Financial Derivatives module is all about
The Financial Derivatives module is a stand-alone, core module, spanning across two semesters. It consists of lectures and seminars and, to a great extent, external independent reading. It starts with an in-depth analysis of various financial instruments called derivatives. Some examples are options, futures, and forwards.
You will definitely come across some key terms relating to financial derivatives in movies about Wall Street such as “The Big Short”. For example, shorting, feeling bearish or bullish or margin calls. Derivatives are used for many reasons such as income or capital gains but the main reason for their popularity is their ability to reduce the downside risk of trading.
Essentially if they are used properly, they can limit your losses while keeping your profit potentially unlimited.
This module is assessed through a practical assignment in the first Semester and an exam in the second Semester. The assignment only counts towards 30% of your final mark but it was by far the most interesting part of the module for me. It required me to build a portfolio consisting of at least 30% derivatives, then choose a trading strategy, implement it, and finally write a report on the outcome of my strategy.
The assignment gave me the opportunity to use well known platforms used by investment banks such as the Bloomberg terminal. It gave me the chance to manage a portfolio and invest in stocks using derivatives on real-time simulated trading platforms such as the Interactive Broker. This allowed me to get involved in the market and put what I have learnt from lectures and books into practical use.
The most challenging part of the assignment was also the most impactful part. I say challenging because, although my tutor was always there to answer my questions and provide me with necessary materials to get me going, I had to figure most things out myself.
This was in fact the whole idea behind the assignment, to let students experience what they will be doing as investment banking analysts, brokers, or traders in the future. This degree of independence enabled me to go into trading platforms head on, which gave me the chance to learn faster.
You might think that asking us to trade after two months of studying was premature. However, although the data on the trading platform is in real time, the trading itself is simulated so when I lost any money while trying to figure out how to trade, I could click restart and it would revert the position of my portfolio back to its original state.
This practical, trial & error aspect of the assignment made it extremely interesting. I could see how my analysis, speculations and knowledge come together in a real trading scenario. I could see how my portfolio was doing and whether my big idea about the movement of a certain stock price was right or wrong. It is an interactive way of learning, which is, in my opinion the best way of learning.
So, it is fair to say that this module makes you feel like you are getting ready to become the next Wolf of Wall Street. It is engaging, interesting and pragmatic. Learning about different trading strategies, analysing/forecasting market movements, placing trades, managing a portfolio, and drafting a market report are few of the essential skills which you can expect to gain from this module. I personally find hands on learning to be the most effective method of learning.
The financial derivatives module genuinely gives you the opportunity to experience real life trading. I think the skills I learnt from this module will stay with me for the rest of my career and that is the positive impact I mentioned earlier. If you want to pursue a career in investment banking, you will no doubt enjoy this module and find it extremely useful.
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