module specification

FS7053 - Financial Derivatives and Risk Management (2017/18)

Module specification Module approved to run in 2017/18
Module title Financial Derivatives and Risk Management
Module level Masters (07)
Credit rating for module 20
School Guildhall School of Business and Law
Total study hours 200
 
155 hours Guided independent study
45 hours Scheduled learning & teaching activities
Assessment components
Type Weighting Qualifying mark Description
In-Course Test 30%   In-Class-Test 1.5 hours
Unseen Examination 70%   Unseen Examination 3 hours
Running in 2017/18
Period Campus Day Time Module Leader
Spring semester City Monday Evening

Module summary

This module provide students the opportunity to study major exchange-based and over-the-counter financial derivatives, the concept of financial market risk, its measurement and management using financial derivatives.

Module aims

The module aims of this module are

  • to provide students with a technical understanding of the advantages and disadvantages of major exchange-based and over-the-counter financial derivatives, 
  • to discuss the concept of financial market risk, its measurement and management using financial derivatives.
  • to give students some practical experience of the methods used in risk management.

Syllabus

Financial derivatives: forwards, futures, options and swaps, their operational characteristics and basic underlying principles upon which they are valued. 

Risks and risk management: Identifying risk exposure, information ratios, Value at Risk, volatility, types of risks (focus on financial risk as interest risk and currency risk), market risk and techniques for risk management.

Hedging equity portfolio risk: application of various derivatives in the mitigation of equity risk, some consideration for structured products. 

Hedging interest rate movements: bond price sensitivity, futures, swaps and options. 

Hedging currency risk: in-depth consideration of financial instruments and derivatives available for managing exposure to foreign exchange risk.

Learning and teaching

This module will be delivered by lectures and seminars. The lectures will outline the key concepts and knowledge of trading of derivatives and their application for risk management for global firms.
The seminars will be used for lecturer and students to solve practical problems and discuss relevant topical issues in international trade and finance. The seminars will also be used to and/or to review major articles. The financial market Lab – the Bloomberg facility will be used to provide access to the use of real data on a range of derivatives and their underlying assets, understand information displayed on Bloomberg terminals and trading of those financial instruments and derivatives.

Learning outcomes

On successful completion of this module, students should have a level of understanding of consistent with a MSc in International Trade and Finance degree program in:

  • understanding the operational characteristics of the principal of financial derivatives;
  • identifying exposure to different types of financial market risk;
  • measuring the financial market risk to a global firm;
  • analysing a global firm’s exposure to financial market risk and apply the appropriate financial derivatives  to mitigate the identified risk.

Assessment strategy

This module will be assessed by an in-class test and a final examination. Students will be expected to demonstrate wide reading, in depth knowledge, critical understanding of theoretical, empirical and policy issues, and ability to present their work in a professional manner.
The in class-test and examination may have problem sets that require the use of a computer laboratories for resolution. In such circumstances students will carry out their work in an invigilated setting with no access to written materials.

Bibliography

Back, K. (2005), A Course in Derivative Securities: Introduction to Theory and Computation, Springer, Berlin
Chapman, R. J. (2011) Simple Tools and Techniques for Enterprise Risk Management, 2nd Edition, John Wiley and Sons, Ltd., West Sussex
Chance, D. and Brooks, R. (2013), An Introduction to Derivatives and Risk Management, 10th Edition, Cengage Learning, Boston
Dubofsky, D. and Miller, T.  (2002), Derivatives: Valuation and Risk Management, Oxford University Press, Oxford
Hull, J. (2011), Options, Futures and Other Derivatives, 8th Edition, Pearson Education
Wilmott, P. (2006), Paul Wilmott on Quantitative Finance, Second Edition, John Wiley and Sons.