30184 - RISK MANAGEMENT WITH DERIVATIVES
Course taught in English
Go to class group/s: 31
To feel at ease with this course, students should be familiar with basic concepts such as Integral calculus, Probability and Financial calculus required to understand plain economic and financial models.
Risk is an implicit component of economic and financial activities. It may be defined as a compound measure of the probability and magnitude of adverse effect. In order to hedge risks adequately, it is essential to go deeper into the phases of the risk management process and in particular how to use the derivative contracts. The course aims at providing an understanding of basic financial derivatives and their main implementation by corporations and financial institutions for hedging purposes. The course provides also basic knowledge of pricing and valuation techniques for plain vanilla derivatives.
The course focuses on the following main derivatives instruments:
- What are the main risks to be hedged with derivatives?
- Forwards: contract specifications; forward prices and valuation; hedging with forwards.
- Futures: contract specifications; hedging and trading with futures.
- Interest Rate Swaps: pricing and valuations of Interest rate swaps.
- Options: markets and contract specifications; overview of pricing techniques; hedging and trading with options.
- Credit Default Swaps: contract specifications and basic pricing methods.
- Structured Products: introduction to hybrid products and basic concepts of structuring techniques.
Describe basic financial derivatives (namely forwards, futures, IRS, plain vanilla options and CDS) and the theoretical framework.
Illustrate potential arbitrage opportunities on futures and plain vanilla options.
Recognize main risk profiles and key drivers of finanical derivatives.
- Recognise risks and identify the best hedging instruments.
- Formulate fair price indications for financial derivatives.
- Analyze basic heding and trading strategies with plain vanilla options.
- Face-to-face lectures
- Guest speaker's talks (in class or in distance)
- Exercises (exercises, database, software etc.)
- Case studies /Incidents (traditional, online)
- Group assignments
In-class exercises and case studies.
|Continuous assessment||Partial exams||General exam|
- J. HULL, Options, future and others derivates, Prentice Hall, 8th or 9th edition (a detailed list of relevant chapters/paragraphs is shown in the syllabus presented at the beginning of the course).
- Readings and slides prepared by the instructors and available on the course website (Students' Agenda).