Financial Risk Management

(3 Credit Hours) · Undergraduate

Risk management is an essential element of the modern finance function. Financial Risk Management is the process of identifying risks, analysing them and making investment decisions based on either accepting or mitigating them. These can be quantitative or qualitative risks, and it is often the job of a Finance manger to use the available financial instruments to hedge a business against them. In investment management, risk is managed through diversification and related optimization; while further specific techniques are then applied to the portfolio or to individual stocks as appropriate. In this module, we will focus on when and how to hedge, often using financial instruments to manage costly exposures to risk. We study various types of risk including investment risk and exchange rate risk. We will analyse the tools available to hedge these risks, including various derivative instruments such as forwards, futures, options and swaps.