Financial Risk Management

Unit Code:HBC617

Credit Points	Duration	Contact Hours	Campus	Prerequisite	Corequisite
12.5 Credit Points	One teaching period.	36 hours	Hawthorn	None	None

Credit Points

Duration

Contact Hours

Campus

Prerequisite

Corequisite

12.5 Credit Points

One teaching period.

36 hours

Hawthorn

None

Related Course/s:

A unit of study in the Master of Practising Accounting and a unit of study in the Master of Finance and Banking suite.

Aims & Objectives:

The overall aim of this unit of study is to enable students to be able to identify the sources of financial risk facing a business entity and the importance of implementing effective financial risk management strategies using a variety of derivative instruments.

Identify sources of financial risk confronted by business entities and comprehend the potential benefits of financial
risk management (PO1&8)
Understand and explain the principles that underlie the pricing of futures, forwards, swaps and options; (PO1&4)
Access data on derivative instruments and use this data to formulate hedging and trading strategies and to evaluate
the outcomes of these strategies. (PO2&8)
Work as part of a team to construct hedging strategies using derivative instruments and make recommendations to
management on how to implement hedge programs for identified financial risks (PO6&8)
Provide students with hands-on skills and practice that are critical to building an understanding of derivatives and
their use in managing financial risks. (PO1&4)
Understand the ethical issues confronting business entities, derivatives traders and risk managers (PO6).

Teaching Methods:

Sessions are delivered in 3 hour evening sessions or 5 hour blocks. Total student workload is 120 hours.

Assessment:

Tests (Individual) 20%

Assignment (Group) 20-30%

Examination (Individual) 50-60%

Generic Skills Outcomes:

Teamwork skills
Analysis skills
Problem solving skills
Communications skills
Ability to tackle unfamiliar problems
Avility to work independently
Ability to behave ethically and honestly

Content:

Introduction to financial risk management
Futures and forwards - pricing, valuation and their trading and hedging financial risk
Interest rate futures - short and long term
Interest rate and foreign currency swaps
Options - option types, option payoffs, principles of option pricing, option trading strategies, hedging with options
Interest rate options - using interest rate caps and collars for heding
Credit default swaps and collarateralised debt obligations
Consideration of corporate governance and ethical issues arising from the trading of derivative products
Case studies of losses caused by 'rogue traders' and lack of controls, e.g. National Australia Bank, Societe Generale, Baring Bros, Orange County

Reading Materials:

Students are advised to check the unit outline in the relevant teaching period for appropriate textbooks and further reading.