The course provides a critical understanding of derivative instruments and their use in risk management. It focuses on the principles and valuation of the main derivative financial instruments and offers thorough coverage of their mechanisms. It also provides a framework of the fundamental principles underlying the pricing of derivative instruments, the identification of hedging techniques, and the critical evaluation and selection of trading strategies in risk management. 

10 x 2 hour practical classes and workshops (including a revision week)

4 x 1 hour tutorials

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1. Report; Group; 1350 words; 25%; ILOs 1-2, 5. 

2. Degree exam: online; Individual; 120 minutes; 75%; ILOs 2-4. 

The course aims to help students:

■ Develop a critical understanding of the risk management function in evaluating, measuring, and managing the financial risks to which institutions and investors are exposed.

■ Gain an in-depth understanding of the characteristics of various derivative securities, their pricing, the most efficient hedging strategies for different risk exposures, and the most appropriate trading strategies under different future scenarios.

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

1. Identify and rank the main risk exposures faced by corporations and investors.

2. Utilise the most appropriate hedging strategies for the mitigation of identified risks.

3. Assess the final outcomes and implication of the use of the derivatives for corporations and investors.

4. Critically evaluate the pricing and trading strategies employed.

5. Work collaboratively in a group and critically appraise published research with reference to the principles and practices learned on the course.