BFM5915 - Options, futures and risk management - 2018

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 outcomes 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: 40% + Examination: 60%

Minimum total expected workload to achieve the learning outcomes for this unit is 144 hours per semester typically comprising a mixture of scheduled learning activities and independent study.

See also Unit timetable information