Durham Business School – Financial Risk Management

Durham Business School – Financial Risk Management

Financial Risk Management

Aims

To build on the core module ‘Managing Finance’ by providing students with the advanced knowledge needed to understand the strategies proposed by specialist practitioners in the field (e.g. corporate treasurers), and the skills to contribute to discussions of risk management up to board level.

CONTENT

Introduction. Return-Risk tradeoffs. Efficient frontier. CAPM model.

Trading in markets. Short selling. Plain Vanilla derivatives: Forwards, futures, swap and options.

How traders manage risks using parameters such as Delta, Gamma etc.

Interest rate risk. Duration and convexity of bonds.

Value at Risk (VaR). Expected shortfalls (ES). Difference between ES and VaR.

Credit risk. Credit default swaps (CDS).

Volatility.

Learning Outcomes

Subject-specific Knowledge:

General techniques used in the valuation of financial derivatives;

Hedging techniques using structured financial derivatives;

Computational methods for financial risk assessment and management.

Subject-specific skills:

By the end of the module students should be able to:

Identify and evaluate the principal financial risks faced by a large company;

Apply techniques of asset portfolio management, with particular emphasis on bond and bill portfolios;

Identify and evaluate the methods by which those risks can be managed, and the extent to which such methods should be used;

Devise and propose credible financial risk management strategies based on a range of generic, and structured, financial derivatives;

Critically assess financial risk management strategies proposed by a company’s risk management practitioners.

KEY SKILLS:

Written communication;

Planning, organising and time management;

Problem solving and analysis;

Using initiative;

Computer literacy.

Modes of Teaching, Learning and Assessment and how these contribute to the learning outcomes of the module

The module is delivered via online learning, divided up into study weeks with specially produced resources within each week. Resources vary according to the learning outcomes but normally include: video content, directed reading, reflection through activities, opportunities for self-assessment and peer-to-peer learning within a tutor-facilitated discussion board. Tutors provide feedback on formative work and facilitate discussion board communication as well as being available for individual consultation as necessary (usually by email and Skype).

The summative assessment of the module is designed to test the acquisition and articulation of knowledge and critical understanding, and skills of application and interpretation within the business context.

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