Faculty of Business and Economics

Monash University

Postgraduate - Unit

This unit entry is for students who completed this unit in 2012 only. For students planning to study the unit, please refer to the unit indexes in the the current edition of the Handbook. If you have any queries contact the managing faculty for your course or area of study.

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6 points, SCA Band 3, 0.125 EFTSL

Refer to the specific census and withdrawal dates for the semester(s) in which this unit is offered, or view unit timetables.

FacultyFaculty of Business and Economics
OfferedCaulfield First semester 2012 (Day)
Caulfield First semester 2012 (Evening)
Sunway First semester 2012 (Evening)
Caulfield Second semester 2012 (Evening)


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.


The learning goals associated with this unit are to:

  1. examine the financial risk management function and its evolution in the corporate world
  2. understand the characteristics of futures and options markets and be able to apply these instruments so as to hedge the risk exposure of the firm
  3. design appropriate risk management strategies using options and futures for hedging and speculation
  4. demonstrate effective research skills to produce a professional quality business report recommending a solution to a risk management problem
  5. demonstrate in an individual summative assessment task the acquisition of a comprehensive understanding of derivative instruments in financial markets, both the mechanism of their operation and their application in hedging risk exposures.


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

Chief examiner(s)

Dr Andrew Sanford

Contact hours

3 hours per week


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, 3844 or 3848.


AFF5290, AFF3751