Derivatives and Risk Management module (BU51021)

Learn about price financial derivatives and how to apply them for risk management.

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Credits

20

Module code

BU51021

This module will broaden your knowledge and understanding of the quantitative theory of financial risk and how financial derivatives can manage that risk.

You will develop critical reasoning skills in financial derivatives and risk management.

This module will equip you with practical skills to apply the most appropriate financial derivatives to manage and hedge the financial market's volatility.

What you will learn

By the end of the module, you will be able to explain:

  • the sources of financial markets risk
  • the key characteristics of various derivative products
  • the use of these products as risk management tools and understanding the implications of hedging via risk-neutral replication and constructing hedge portfolios
  • pricing and hedging principles of a range of derivatives

Assignments / assessment

The assignments comprise the following:

Test 1 (50%)

  • Given in week 5
  • Due in week 6
  • 6 hours effort expected

Test 2 (50%)

  • Given in week 10
  • Due in week 11
  • 6 hours effort expected

This module does not have a final exam.

Teaching methods / timetable

You will learn by taking a hands-on approach. This will involve taking part in tutorials and practical sessions. Learning material is provided through videos, review notes, examples, and tutorial questions.

Week Topics covered
1 No Activities. The module starts from Week 2.
2 Options & Risk Management: Introduction
3 Options & Risk Management: Options pricing by binomial tree model
4 Options & Risk Management: Options pricing by Black–Scholes model
5 Options & Risk Management: Options risk management
6

Test 1 is due

Futures & Risk Management: part (a): Introduction
7 Futures & Risk Management: part (b): Futures pricing (1)
8 Futures & Risk Management: part (c): Futures pricing (2)
9 Futures & Risk Management: part (d): Futures pricing (3)
10 Futures and risk Management
11 Test 2 due

 

Courses

This module is available on following courses: