Advanced Finance

Unit code: HBC343N

Aims and objectives

At the completion of this unit, students will be able to:

Explain the nature and sources of financial risk confronted by business entities and the benefits of financial risk management
Comprehend the importance of implementing sound principles of effective risk management in business entities
Calculate theoretical forward and futures prices and values
Explain the principles that underlie option pricing models
Construct interest rate and foreign currency swaps
Devise strategies to implement hedge programs for identified financial risks using derivative instruments and to evaluate the outcome of the strategy

Lecture (1 hour), Tutorials (2 hours)

Assignment 15%; Presentation 10%; Test 20 %; Exam 55%

The graduate attributes which relate to this unit help to produce graduates who are:

Capable in their chosen professional, vocational or study areas
Entrepreneurial in contributing to innovation and development within their business, workplace or community
Effective and ethical in work and community situations
Adaptable and able to manage change
Aware of local and international environments in which they will be contributing (eg socio-cultural, economic, natural)

An introduction to financial risk management
Futures and forwards – pricing, valuation and their use in hedging financial risk
Options – option types, option payoffs, principles of option pricing, option strategies, hedging with options
Interest rate and foreign currency swaps
Interest rate derivatives, using interest rate caps and collars for hedging
Benefits of risk management and corporate hedging policies

Students are advised to check the unit outline in the relevant teaching period for appropriate textbooks and further reading.