FINAN518-20G (HAM)

Financial Risk Management

15 Points

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Division of Management
School of Accounting, Finance and Economics

Staff

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Convenor(s)

Lecturer(s)

Administrator(s)

: denise.martin@waikato.ac.nz

Placement/WIL Coordinator(s)

Tutor(s)

Student Representative(s)

Lab Technician(s)

Librarian(s)

: clive.wilkinson@waikato.ac.nz

You can contact staff by:

  • Calling +64 7 838 4466 select option 1, then enter the extension.
  • Extensions starting with 4, 5, 9 or 3 can also be direct dialled:
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    • For extensions starting with 3: dial +64 7 2620 + the last 3 digits of the extension e.g. 3123 = +64 7 262 0123.
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Paper Description

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This paper aims to introduce fundamental concepts, theories and practices of financial risk management involving portfolio risk management and financial derivatives including options and swaps. Major topics to be covered include optimal portfolio strategies, option markets and option pricing models, Greek letters and delta hedging strategy, interest rate swaps and credit default swaps, and value at risk.

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Paper Structure

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The main activities of this paper include:

Lectures

Workshops

Online Quiz

In-class Test

Group Project

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Learning Outcomes

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Students who successfully complete the course should be able to:

  • Understand the concepts and theories of optimal portfolio construction involving multiple assets. Students are able to apply appropriate strategies to managing risk of portfolios. [LO1]
    Students are expected to be familiar with investment behavior in a simulated context.
    Linked to the following assessments:
  • Articulate the fundamental properties of an option and mechanisms of option market. Students are able to evaluate option value by using binomial model. [LO2]
    Linked to the following assessments:
  • Understand the pricing mechanism of options such as Black-Scholes model. Students are able to understand the mechanisms of Greek letters and delta hedging strategy. [LO3]
    Linked to the following assessments:
  • Illustrate pricing mechanism and properties of swaps. Students are able to articulate the properties and functionalities of credit default swap (CDS). [LO4]
    Linked to the following assessments:
  • Understand the techniques of evaluating downside risk such as Value at Risk (VaR). [LO5]
    Linked to the following assessments:
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Assessment

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There are four pieces of internal assessment for this paper.

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Assessment Components

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The internal assessment/exam ratio (as stated in the University Calendar) is 100:0. There is no final exam. The final exam makes up 0% of the overall mark.

The internal assessment/exam ratio (as stated in the University Calendar) is 100:0 or 0:0, whichever is more favourable for the student. The final exam makes up either 0% or 0% of the overall mark.

Component DescriptionDue Date TimePercentage of overall markSubmission MethodCompulsory
1. Online Quiz 1
20 Nov 2020
6:00 PM
20
  • Online: Submit through Moodle
2. Online Quiz 2
4 Dec 2020
6:00 PM
20
  • Online: Submit through Moodle
3. Group Project
16 Dec 2020
6:00 PM
30
  • Online: Submit through Moodle
4. In-class Test
17 Dec 2020
10:00 AM
30
  • In Class: In Test
Assessment Total:     100    
Failing to complete a compulsory assessment component of a paper will result in an IC grade
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Required and Recommended Readings

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Required Readings

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Hull, J.C. (2012). Options, Futures, And Other Derivatives. 8th Edition. Pearson Education Limited.

Bodie, Kane, and Marcus (2019). Essentials of Investments, 11th ed., McGraw-Hill Education.

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Recommended Readings

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For additional readings of this paper, refer to Waikato Reading List (https://rl.talis.com/3/waikato/lists/E09D94CB-086A-44A1-695F-70227F6F659B.html?lang=en-US).

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Other Resources

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Other teaching materials will be provided online via Moodle where necessary.

Please contact the Paper Convenor for further details.

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Online Support

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All the resources about this paper will be available on Moodle.

The online resources may be updated where necessary.

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Workload

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There are 150 learning hours for this paper. They will be spent on the following activities:

Attend lectures and workshops

Read teaching materials and research articles

Conduct analyses and write project report

Prepare for and sit the quizzes and test

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Linkages to Other Papers

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Note any linkages to other papers where the linkage is of importance.
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Prerequisite(s)

Acceptance into the Master of Applied Finance programme.

Corequisite(s)

Equivalent(s)

Restriction(s)

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