FINAN518-22G (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)

Greg Hou

Greg Hou
9402
MSB.3.25
See Moodle
greg.hou@waikato.ac.nz

Lecturer(s)

Administrator(s)

: denise.martin@waikato.ac.nz

Placement/WIL Coordinator(s)

Tutor(s)

Student Representative(s)

Lab Technician(s)

Librarian(s)

: yilan.chen@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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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 and simulation, fundamentals of options markets, option pricing models and associated risk management strategies, interest rate swaps, and foreign currency swaps.

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Paper Structure

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The main activities of this paper include:

Lectures and Workshops

Trading Lab Sessions

Online Quizzes

Online Test

Individual Project

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Learning Outcomes

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Students who successfully complete the paper should be able to:

  • Market risk management [LO1]
    Articulate the concepts and theories of optimal portfolio construction involving multiple assets. Students are able to apply appropriate strategies to managing risks of portfolios. Students are expected to implement portfolio diversification strategies in a simulation context.
    Linked to the following assessments:
  • Advanced market risk management [LO2]
    Articulate the fundamental properties of an option and mechanisms of the options market. Students are able to evaluate option value by using the binomial model.
    Linked to the following assessments:
  • Advanced market risk management [LO3]
    Demonstrate the pricing mechanism of options such as Black-Scholes model. Students are able to implement delta hedging strategy.
    Linked to the following assessments:
  • Interest rate risk management and foreign exchange risk management [LO4]
    Illustrate pricing mechanism and properties of different types of swaps. Students are able to calculate the fair values of interest rate swaps and foreign currency swaps.
    Linked to the following assessments:
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Assessment

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There are four pieces of internal assessment for this paper. There is no final exam.

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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
2 Dec 2022
6:00 PM
20
  • Online: Submit through Moodle
2. Online Quiz 2
9 Dec 2022
6:00 PM
20
  • Online: Submit through Moodle
3. Individual Project - Portfolio Simulation
16 Dec 2022
5:00 PM
30
  • Online: Submit through Moodle
4. Online Test
19 Dec 2022
2:00 PM
30
  • Online: Submit through Moodle
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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There are no required textbooks for this paper. Below are the highly recommended textbooks:

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

Bodie, Kane, and Marcus (2022). Essentials of Investments, 12th 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/1E77AF4F-FFF6-3D19-C2D4-46034E6EEBDF.html?lang=en).

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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 mainly spent on the following activities:

Attend lectures and workshops

Read teaching materials

Conduct simulation and analyses on portfolios in X-Plan and write the 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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