Financial Derivatives & Risk Management
Regulatory reforms across the world are gradually being introduced to reduce trade impediments between nations and usher in free market based pricing. Cross border investments through direct/portfolio routes are also being enticed as a medium for funding of growth and developmental activities. In addition, the governments of developing nations continue to pursue their strategy of partial privatization of the frontier sectors in an attempt to raise revenues for the exchequer as well as reduce operational losses with increased efficiency. Under these stimuli, scientific risk management by the investor fraternity becomes of cardinal necessity for generating competitive returns and surviving in the marketplace. Derivatives have proven to be immensely useful in the management of financial risk. Their vitality can be gauged from the exponential growth in trading volumes as well as the advent of new structured products literally on a day to day basis. you’ll examine key information about the derivatives markets. You’ll study the ways in which derivatives are traded in financial markets.
Objectives
- develop practical skills in quantitative analysis so you can price forwards, options and swaps
- learn about the processes that govern derivatives valuation and the factors that influence derivatives prices
- analyse the role of derivatives in risk management processes.
- Explain the economics and structure of basic derivatives: forwards, futures, options and swaps, and other interest rate and credit derivatives.
- Describe the structure and organisation of the derivatives markets and the mechanism of derivatives trading.
- Communicate the principles and mechanism of derivatives pricing along with the factors that influence the valuation process.
- Value options using the binomial tree model and Black-Scholes model, and use Excel spreadsheets to do so.
- Identify how derivatives can be used for hedging purposes and provide practical solutions in this area.
- Discuss the importance of derivatives in risk management.
- Analyse the use of derivatives for risk management purposes in practical applications.