AFF9150 - Options, futures and risk management

Offered

Caulfield First semester 2009 (Day)
Caulfield First semester 2009 (Evening)
Caulfield Second semester 2009 (Evening)
Sunway First semester 2009 (Evening)

Synopsis

This unit examines how options and futures can be used for hedging risk in the process of risk management. Several aspects of risk management are examined, including the reasons why investors indulge in this activity, how value is created via risk management, and the firm-wide approach to risk management (given that any firm is exposed to a wide variety of risks). Once the importance of risk management has been established, emphasis turns to the use of derivatives (futures and options) to manage risk. To understand how they are used to manage risk, the unit also considers the characteristics and pricing of these instruments, including some exotic versions.

Objectives

The learning goals associated with this unit are to:

• describe the risk management function and its evolution in the corporate world
• demonstrate how risk management adds to the value of the firm
• demonstrate how financial risk can be measured
• describe futures and options markets and the characteristics of these derivatives
• explain the pricing of futures and options
• demonstrate how options and futures can be used for hedging and speculation.

Assessment

Within semester assessment: 30%
Examination (3 hours): 70%

Contact hours

3 hours per week

Co-requisites

Only students enrolled in one of the following courses may undertake this unit:
0028, 0396, 0503, 0504, 0790, 0826, 1445, 1499, 2098, 2619, 3174, 3176, 3177, 3179, 3189, 3822, 3843 or 3844.

Prohibitions

AFF5290, AFF3751