The course provides a critical understanding of derivative instruments and their uses for risk management purposes. It focuses on the principles and the valuation of the main derivative financial instruments and thoroughly covers the trading mechanisms of these instruments. It also provides a framework of the fundamental principles underlying the pricing of derivative instruments, along with their use in portfolio management, and critically evaluates the existing models used in portfolio analysis.

Lectures: One 2-hour lecture per week for 10 weeks

Tutorials: 1-hour for 6 weeks.

Lecture timeslots are available on MyCampus. Tutorials are held at various times and can be selected on MyCampus.

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The course aims to help students develop a critical understanding of the risk management function in evaluating, measuring and managing financial risk that institutions and investors are exposed to. The course will further provide an in-depth understanding on the characteistics of the various derivative securities, their valuation and usage in altering the risk profile of the portfolios.

By the end of this course students will be able to:

1) Critically evaluate the characteristics of the environment in which multinational corporations and international investors operate, covering both international asset pricing and corporate risk management.

2) Apply appropriate analytical and critical thinking to identify, evaluate, compare, and mitigate a range of financial risk exposures faced by multinational corporations and international investors from an integral point of view.

3) Critically appraise and assess the theoretical underpinnings and empirical evidence concerning modern asset pricing and risk management techniques under a range of risk exposures such as climate change and COVID, among others. 

4) Work collaboratively in a group to produce a combined piece of academic writing, by liaising with other class members and critically appraising published research with reference to the principles and practices learnt on the course, allocating tasks and co-ordinating group meetings. 

5) Evaluate the various aspects of derivative securities, including the operations of futures, forwards, options, and swap markets with respect to their valuation and hedging strategies for portfolio risk management.

Students must submit at least 75% by weight of the components (including examinations) of the course's summative assessment.