Course objectives:

This course discusses financial risk management and financial derivatives including
forward and futures markets and contracts, options markets and swap markets. The course also
discusses the risk management applications used for all those contracts in detail.

RISK MANAGEMENT (Week 1 – 2)

 Introduction
 Types of Risk
 Exchange Rate Risk (Translation Risk / Transaction Risk)
 Methods/Techniques for reducing Exchange Rate Risk

DERIVATIVE MARKETS AND INSTRUMENTS (Week 3)

 Introduction
 Types of derivatives
 Derivative markets: Past and present
 The purposes of derivative markets

FORWARD MARKETS AND CONTRACTS (Week 4 – 5)

 Introduction
 Types of forward contracts
 Pricing and valuation of forward contracts
 Credit risk and forward contracts

FUTURES MARKETS AND CONTRACTS (Week 6 – 7)

 Introduction
 Futures trading
 The clearinghouse, margins, and price limits
 Delivery and cash settlement
 Futures exchanges
 Types of futures contracts
 Pricing and valuation of futures contracts
OPTION MARKETS AND CONTRACTS (Week 8 – 9)
 Introduction
 Basic definitions and illustrations of options contracts
 Types of options
 Principles of option pricing
 Discrete-time option pricing: the binomial model
 Continuous-time option pricing:

SWAP MARKETS AND CONTRACTS (Week 10 – 11)

 Introduction
 Types of swaps
 Pricing and valuation of swaps
 Swaptions

RISK MANAGEMENT APPLICATIONS OF FORWARD AND FUTURES

STRATEGIES (Week 12 – 13)
 Introduction
 Strategies and applications for managing interest rate risk
 Strategies and applications for managing equity market risk
 Strategies and applications for managing foreign currency risk
 Futures or forwards

RISK MANAGEMENT APPLICATIONS OF OPTION STRATEGIES (Week 14 – 15)

 Introduction
 Option strategies for equity portfolios
 Interest rate option strategies
 Option portfolio risk management strategies

Recommended Book:

“Analysis of Derivatives for the CFA Program” by Don M. Chance. Louisiana State University