Financial Risk Management
Overview
This unit enables students to analyse the sources of financial risk as well as the importance of implementing hedging procedures in order to mitigate risk. The unit 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 that underscores the importance of this unit, whereby it has become a basic best practice in order to mitigate unforeseen losses. Students will also learn how to mitigate financial risks using a variety of financial derivatives.
Requisites
27-October-2024
09-February-2025
01-June-2025
02-November-2025
08-February-2026
Learning outcomes
Students who successfully complete this unit will be able to:
- Analyse the sources of financial risk and the importance of implementing effective financial risk management procedures in business entities
- Apply the understanding of a variety of derivative instruments in hedging and trading strategies and how these instruments are priced
- Evaluate hedging strategies and their outcomes using derivative instruments, to hedge financial risks in a variety of assets
- Evaluate the need for sound financial risk management policies and procedures in organisations within an ethical framework
- Apply research principles to conduct a piece of work collaboratively
Teaching methods
Hawthorn Online
| Type | Hours per week | Number of weeks | Total (number of hours) |
|---|---|---|---|
| Online Directed Online Learning and Independent Learning | 12.50 | 12 weeks | 150 |
| TOTAL | 150 |
Swinburne Online and OUA
| Type | Hours per week | Number of weeks | Total (number of hours) |
|---|---|---|---|
| On-campus Class | 2.00 | 12 weeks | 24 |
| Online Lecture | 1.00 | 12 weeks | 12 |
| Unspecified Activities Independent Learning | 9.50 | 12 weeks | 114 |
| Online Directed Online Learning and Independent Learning | 12.50 | 12 weeks | 150 |
| TOTAL | 300 |
Assessment
| Type | Task | Weighting | ULO's |
|---|---|---|---|
| Assessment | Individual | 40 - 60% | 1,2,3,4 |
| Assessment | Individual | 20 - 30% | 1,2,3 |
| Assignment | Group | 20 - 30% | 1,3,5 |
Content
- Introduction to financial risk managementÂ
- 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 optionsÂ
- 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
- Currency risk management
Study resources
Reading materials
A list of reading materials and/or required textbooks will be available in the Unit Outline on Canvas.