Derivatives and Risk Management


Course Code (Undergraduate): 910952

Course Code (Postgraduate): /

48 Contact Hours

7.5 ECTS points Credit Points

Course Description

The students will explore the methods for evaluating and managing the financial risk of companies and financial organisations. Particular emphasis is placed on fundamental pricing principles and the use of contemporary financial products in managing risk, including futures, forwards, options and swaps.

This course looks at existing policies and reflects on how these policies have been influenced by the substantial losses in financial markets from the past few decades, which have led to many companies forming risk management divisions of their own. By the end of the course, students will learn to understand the assessment and treatment techniques for the major categories of risk faced by all organizations and be equipped with problem-solving and analytical skills required to deal with financial risks. Students will also acquire knowledge of relevant frameworks and tools required to effectively manage these financial risks.


Schedule and Topics

1. Introduction to derivatives
2. The importance of risk management and the approach to risk management
3. Mechanics of Futures Markets
4. Hedging Strategies Using Futures
5. Determination of Forward and Futures Prices
6. Interest Rate Futures
7. Swaps
8. Mechanics of Options Markets
9. Properties of Stock Options
10. Trading Strategies Involving Options
11. Binomial Trees, Wiener Processes and Itô’s Lemma and The Black-Scholes-Merton Model
12. Options on Stock Indices and Currencies
13. Options on Futures
14. Greek Letters and Volatility Smiles
15. Basic Numerical Procedures
16. Risk Management and Value at Risk
17. Exotic Options
18. More on Models and Numerical Procedures
19. Derivatives Mishaps and What We Can Learn from Them


In class quizzes (3* 10% each);
Individual Assignment (30%);
Final examination (40%).


Sound knowledge of topics covered in introductory Financial Studies units is a necessary basis for satisfactory completion of this course.

Reference Books

Required textbook:
Futures, Options and Swaps, by R. W. Kolb, 4th Ed, Blackwell Publishing, 2003.

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Course Code (Undergraduate): 910952
Course Code (Postgraduate): /


学时: 48 Contact Hours
学分: 7.5 ECTS points
语言: English, 中文
课程开放日期:28 June 2021
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