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Subject details

  • Topics
    • Introduction to financial risk management
    • Futures and forwards - pricing, valuation and their use in hedging financial risk
    • Options - option types, option payoffs, principles of option pricing, option strategies, hedging with options
    • Interest rate and foreign currency swaps
    • Interest rate derivatives, using interest rate caps and collars for hedging
    • Credit derivatives - credit default swaps (CDS); collateralised debt obligations (CDO)
    • Financial risk management policies and procedures, ethics and governance

Students who successfully complete this subject will be able to:

  1. Analyse the sources of financial risk and the importance of implementing effective financial risk management procedures in business entities
  2. Apply the understanding of a variety of derivative instruments in hedging and trading strategies and how these instruments are priced
  3. Evaluate hedging strategies and their outcomes using derivative instruments, to hedge financial risks in a variety of assets
  4. Evaluate the need for sound financial risk management policies and procedures in organisations within an ethical framework.
  5. Apply research principles to conduct a piece of work collaboratively.
  • Assignment 1 - Online Individual (30-40%) (0%)
  • Assignment 2 - Group (10-20%) (0%)
  • Assignment 3 - Individual (40-60%) (0%)

Textbooks are subject to change within the academic year. Students are advised to purchase their books no earlier than one to two months before the start of a subject

Entry Requirements

You must have successfully completed the following subject(s) before starting this subject:

Special requirements

No special requirements

This subject enables students to analyse the sources of financial risk as well as the importance of implementing hedging procedures in order to mitigate risk. The subject is designed to equip students with quantitative skills and understanding of a variety of derivative instruments that can be used for hedging purposes, while broadening their knowledge of managing risk within an ethical framework. The increasing instability of global financial markets and ethical scandals underscores the importance of this subject, whereby it has become a basic best practice in order to mitigate unforeseen losses. Students will also learn to how to mitigate financial risks using a variety of financial derivatives.

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